Family finances under pressure
Research by Aviva showed while incomes have dropped, expenditure has increased and families are shelling out more than ever to entertain their families, spending nearly £1,800 a year (£148 per month).
Almost half (46%) of families say they have not spent anything on holidays this quarter, although the vast majority (79%) have paid for entertainment and leisure activities.
On average families are spending £63 per month on leisure interests (excluding holidays), while children’s activities add £85 to parents’ monthly bills. The families who do pay for breaks budget an average of £158 per month, amounting to £1,896 annually.
Family debt levels have risen over the quarter, creeping up from £9,314 in May 2012 to £10,563 (excluding mortgage debt). The most common types of borrowing are through credit cards (£5,134) personal loans (£8,555) and overdrafts (£4,423).
However, loans from family and friends have more than doubled over the last quarter from £701 (May 2012) to £1,545 (August 2012). This is the highest figure disclosed since the report series began, and perhaps an indication that people are turning to families to avoid more formal borrowing and its associated charges.
While incomes have fallen overall, figures also suggest a drop in the number of more ‘well-off’ families. The report series shows the proportion of families with an income of more than £2,500 per month has fallen from 36% to 31% year on year. This seems to suggest that while employment figures have improved, salaries at the mid to upper end of the scale may not have done.
The typical family’s savings fell to £1,131 (Aug 2012) from £1,228 (May 2012) but remain higher than the same period last year (£982 – Aug 2011). In addition, the number of families with no savings rose to 28% (Aug 2012) from 24% (May 2012), but again this is lower than in August 2011 (31%). This is positive news as it indicates that while people may take money out of savings to meet summer costs, year on year the overall trend suggests more families are saving.
Louise Colley, head of protection sales and marketing for Aviva, said: “Again this report shows that families are making difficult decisions to balance the books. Even in the peak holiday season almost half of families aren’t spending any money on breaks, but it seems parents are trying to reach a compromise by spending on days out and children’s activities.
“As every parent knows, school holidays can be a financial challenge, particularly for workers who don’t receive paid leave. However it seems that families are trying to cut their cloth accordingly and the fact that some have dipped into savings this quarter suggests they may have been planning ahead. Families can take comfort in the fact that summer is the ultimate seasonal blip and that normality will return soon.”