Household costs rise by £4,000 in a year for UK families

Article date: 23 January 2013

UK Families Report Spending £331 More Per Month Since November 2011

  • Marginal rise in incomes outweighed by mounting expenses
  • Families prioritise spending and make efforts to increase savings
  • Unsecured debts peak at £11,101 as more families rent or live with parents

UK families report they are spending £3,972 a year more on household expenses than in November 2011, the latest Aviva Family Finances Report reveals today.

The report, which tracks the financial circumstances of different UK families, shows how price rises on essentials such as food, utility bills and public transport fares are forcing families to tighten their belts and cut back on luxuries. The typical family’s monthly outgoings are now £1,819, and while many of the increases seem small in isolation at £20-£30 a month on average, the table below shows how they can add up over the course of a year.

Significant increases in essential monthly expenses November 2011 – January 2013


Monthly cost Nov 2011
Monthly cost Jan 2013
Increase per month
Increase per year*
Public transport fares and other travel costs
£85.60
£114
£28.40
£340.80
Debt repayment
£224.05
£244 £19.95 £239.40
Food
£253.54
£273
£19.46
£233.52
Fuel and light (e.g. gas and electricity bills)
£135.57
£154
£18.43
£221.16

* Based on the monthly increase over a 12-month period – please note that some expenses are subject to seasonal changes.

With more pressure on their finances, families are instead making efforts to cut back on non-essential spending. Since November 2011 the number of families spending on sport and leisure goods has fallen from 61% to 55%, while spending on personal goods such as make-up and medicines has dropped from 81% to 76% of families. Notably the figures also suggest a significant number are sacrificing an arguable ‘essential’ by cutting motoring costs to reduce their outgoings (77% to 72%).

Family income increases slightly… but the impact of children is clear
There is some good news to accompany the rising cost of living, in that typical monthly net income has increased over the same period (November 2011 – January 2013) to £2,043 per family (£1,983 – November 2011). However, at £60 per month or £720 per year, this increase is comparatively small when viewed alongside living expenses.

The report also shows clearly the impact of children on people’s earning capacities, as the highest earning families continue to be those couples planning children (£2,265 per month). Of families with dependents, those with two children have the largest typical monthly income (£2,016), followed by one-child families on £1,989 and £1,818 for three-child families.

Family savings see a surge
Despite increasing outgoings, the typical family’s savings are at their highest point – £1,277 – since the Family Finances Report series launched in January 2011. This is a marked improvement on the £967 which the average family had saved in November 2011 and suggests that after median savings sank to £928 in January 2012, people have been making a concerted effort to increase their savings pots.

Family debts peak following seasonal spending
The typical UK family owes £11,101 in unsecured lending in January 2013, which has grown from £10,563 in August 2012 and is the largest amount of family borrowing recorded by the report series. Credit cards continue to be the most popular form of borrowing (39% of families), followed by overdrafts (26%) and personal loans (22%).

However, the number of families with these types of credit has fallen, indicating that debt is increasingly concentrated. While typical amount borrowed on credit cards has risen by 18% in the last quarter, overdrafts have been scaled back by 11%.

Most common borrowing methods in January 2013 compared with August 2012

Type of borrowing Percentage of families with this type of credit Amount owed by those who use this type of credit
Credit Card 39% (-6 percentage points) £6,055 (+£921)
Personal Loans 22% (-5 percentage points) £8,591 (+£36)
Overdraft 26% (-3 percentage points) £3,955 (-£428)

Single parents make the most use of pay-day loans (14%) and pawnbrokers (9%), and it appears their use is on the rise, as only 8% of single parents were turning to these methods in August 2012. This suggests these families have found their finances especially squeezed, but overall, the use of pawnbrokers and pay-day loans has
remained static at 4% and 6% respectively among all families. Around one in five (21%)  single parents and younger couples planning a family make use of informal borrowing from family and friends, compared with 15% of all families.

More families opt to rent or live with parents

An increasing number of families (25%) reside in private rented accommodation in January 2013, compared with 19% in November 2011. The biggest rise has been among younger couples who plan to have children, with 45% renting in January 2013 compared with 33% in November 2011.

Additionally, an increasing number of couples who plan to have children are living with their parents – up from 2% to 6% between November 2011 and January 2013. The suggestion is that the cost of climbing onto the property ladder is prompting more people to take this temporary measure in order to help save for their future.

Louise Colley, head of protection sales and marketing says: “This latest report reveals a mixed bag of fortunes for UK families as they face higher living costs set against relatively stagnant incomes. However, it’s promising to see that families are adjusting their spending habits to take account of these changes and good news that these growing expenses have not prevented families increasing their debt repayments or savings.

“It’s also no surprise to find that children have a significant impact on family incomes, so it’s reassuring that many couples planning a family are getting their house in order by building their savings or living with parents to cut costs – before they start out on the next stage of life with children.”

Download the Family Finances Report January 2013 PDF (1.0MB)

- Ends -

If you are a journalist and would like further information, please contact:

Sarah Poulter : Aviva Press Office: 01904 452828 : 07800 691569 : sarah.poulter@aviva.co.uk

Lee Blackwell / Andy Lane: The Wriglesworth Consultancy: 020 7427 1400 : aviva@wriglesworth.com

Notes to editors:

The Aviva Family Finances report is an in-depth study into the financial needs of the 84% of the UK population who live as part of a modern family. Based on customer profiles and Government data Aviva has recognised the six most common types of modern family as:

  • Living in a committed relationship with no plans to have children
  • Living in a committed relationship with plans to have children
  • Living in a committed relationship with one child
  • Living in a committed relationship with two or more children
  • Divorced/separated/widowed with one or more child 
  • Single parent raising one or more child alone

Methodology:

Data was sourced from the Aviva Family Index which used findings from over 16,000 people who are members of one of the six groups of families identified above via OpinionMatters. This report is a definitive look at the personal finances of families in the UK. Not only does it look at personal wealth, income sources and expenditure patterns but also tracks how these change across the different types of family unit.

In addition to the regular data, in each edition a spotlight will be shone onto a different relevant topic. This issue has a focus on financial pressures for parents at different life stages.
                                      
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