Article date: 16 November 2011
- Non-essential spending falls as inflation on basics bites
- Typical family owes £10,604 in unsecured debt
- Monthly savings levels hit lowest in 2011 (£19 – November 2011)
Families continue to cut back on non-essentials as income fails to keep up with inflation, debts increase and monthly savings hit their lowest levels for 2011. This is according to research from the latest Aviva Family Finances Report*. The report also highlights the prevalence of inter-family lending and the impact this can have on a family’s finances.
Discretionary spending falls:
Average monthly incomes have only risen by £46 since January 2011 (£1,983 - November 2011 vs £1,937 - January 2011) but families have been faced with significant inflationary increases on essentials. The cost of energy bills (+18.8%), motoring (+8.7%), public transport (+8.5%) and food (+6.9%) have all soared - which means discretionary income has been squeezed.
To meet these increased costs, UK families have cut back - or cut out - spending in other areas and between August and November the number of families spending on ‘luxuries’ or non-essential items has fallen to a new low. Currently 25% of families are spending nothing on recreation and holidays, 39% spend nothing on leisure goods, and 52% spend nothing on children’s activities.
Average family’s debt equal to half average family annual income:
More than half of UK families (52%) have unsecured debts and the typical amount owed is £10,604**. This means that UK families now owe just under half their annual household income (£23,796 – November 2011).
The most common type of borrowing is on credit cards (average £5,629 - 43% of families), overdrafts (£4,723 - 26% of families) and personal loans (average £8,052 - 25% of families). While the amount owed is significant for some people, the typical indebted family spends £224 or 9% of their monthly income on debt repayment.
While the majority of families appear to be meeting their borrowing obligations, we have seen the number of people who are spending money on debt repayment drop from 58% (August 2011) to 52% (November 2011). It remains to be seen whether this is because they have repaid what they owe, or whether they are defaulting.
Average savings pot falls:
The typical savings pot (excluding any pensions or property) is now just £967 (November 2011) - down 2% from £982 (August 2011) - as the average family saves just £19 per month (£34 - August 2011). This is the lowest monthly savings rate recorded in 2011 and a clear sign that inflation is making it harder for families to put aside money than ever before.
Women (£4 - November 2011 vs £16 - January 2011), who traditionally do much of the day-to-day household budgeting, have seen their savings fall while men (£58 - November 2011 vs £39 - January 2011), have seen a slight increase in the typical amount saved each month.
Worries shift as high inflation becomes the norm:
While increases in the cost of basic necessities (a concern for 61%) remains UK families’ biggest financial worry over the next three months, people seem to be adjusting to the sustained period of high inflation (64% were worried in Aug 2011). However, the advent of the festive season and the approach of winter mean that families are now more concerned about unexpected expenses (42% - November 2011 vs 40% - August 2011).
Paul Goodwin, director of workplace savings, Aviva comments: “For many, 2011 has been a tough year characterised by spending cut-backs, inflationary pressures and financial worries. Incomes have only risen by £46 since January so to make ends meet, we have found that UK families are cutting out luxuries, economising on spending and reducing the typical amount they save.
“Typical UK families now save under £20 a month, but the number of non-savers remains steady - which does suggest that those in the savings habit are still actively trying to put money away where possible. We hope that we will see a return to more favourable financial conditions for UK families in 2012.”
If you are a journalist and would like further information on a specific family group, please contact:
Aviva press office:
Telephone: 01904 452828 / 07800 691569
The Wriglesworth Consultancy
Lee Blackwell / Ben Marquand
Telephone: 020 7427 1400
* 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.
** Due to changes in the reporting process, it is not possible to compare this to the previous quarter.
Data was sourced from the Aviva Family Finances Report which used findings from over 8,000 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, each quarter a spotlight will be shone onto a different relevant topic with costs associated with inter-family lending investigated this quarter.
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* based on gross worldwide premiums at 31 December 2010.
** at 31 December 2010.