Many UK families are under extreme financial pressure with 39% saying they are too stretched to take on any additional financial obligations, according to research from the first Aviva Family Finances Report.
The findings were revealed in this new quarterly report from Aviva, designed to develop a true understanding of the financial issues faced by the 84% of the UK population who live as part of a family. Overall the Aviva report paints a picture of UK families who are surviving – and even thriving – but are in debt, apprehensive about additional costs, and unwilling or unable to put aside money for the future.
Among the greatest concerns to families in both the short (six months) and long term (five years) are the significant increases in the cost of necessities (57% and 54% respectively), redundancy (45%, 49%) and unexpected expenses (39%, 37%).
In addition, almost two thirds of families in the UK own their own home (average value – £207,548) and housing is the largest single expenditure for UK families, making up one fifth (20%) of their monthly outgoings. Therefore, any sudden changes to mortgage rates are likely to hurt this group in particular. Notably 13% of families see this having a significant impact on their standard of living over the next six months (18% over the next five years).
While most UK families own their homes and have some savings, they also have significant debts. Indeed, the average mortgage debt is £89,018 and the average credit card/loan/overdraft debt is £5,360. Single parents (40%) are actually most likely to be free of these debts, while those in a committed relationship with plans to have children (26%) are least likely.
While this data might appear to suggest single parents are relatively debt free, this is not the case across the board. Indeed single parents say they spend 29% of their monthly income on debt repayments, so a lack of available credit may mean this group relies on less traditional borrowing arrangements.
A third (33%) of families have no savings and 40% currently save nothing each month – which might suggest that some people who have saved in the past have stopped doing so. Even among families that do save, one in four (25%) have less than £2,000 put aside, meaning they have very little to fall back on should an emergency occur.
Single parent families are those likely to struggle the most financially in this situation with 60% having no savings and 62% not managing to save anything each month.
A reliance on benefits
With 42% of single parents relying on state benefits as part of their income, they are the group most reliant on Government support. But as part of the 2010 Comprehensive Spending Review, the Government has undertaken a universal cap, restricting total benefits per family to approximately £500 per week by 2013 – in line with the median earnings after tax for working households.
The potential impact of these changes is understandably something families are concerned about and 45% of single parents consider changes to current Government benefits to be one of their biggest fears for the next five years.
Louise Colley, head of protection marketing at Aviva comments: “This report gives us an interesting insight into the financial issues facing modern families in the UK. Not surprisingly, in today’s society, some families are struggling to make ends meet and 39% feel they cannot take on any additional financial obligations. While it is encouraging to see that most families are trying to save something every month, it is clear that other demands on their finances mean this amount remains below what is needed to guarantee a secure financial future.
“At Aviva, we understand the challenges facing families dealing with a period of high inflation and reduced support from the Government. We encourage families to seek professional financial advice to ensure they are making the most of their money to provide financial security for their family.”
Source : Aviva Press Release
