By Maximilian Clarke
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.
Average monthly incomes have only risen by £46 since January 2011 (£1,983 - Nov 2011 vs. £1,937 - Jan 2011) but families have been faced with significant inflationary increases on essentials. The cost of energy bills are up by 19%, motoring and public transport are up 8.5% and food prices have 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 new lows. 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.
“For many, 2011 has been a tough year characterised by spending cut-backs, inflationary pressures and financial worries," commented Paul Goodwin, Aviva's director of workplace savings. "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 save where possible. We hope that we will see a return to more favourable financial conditions for UK families in 2012.”
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% - Nov 2011 vs. 40% - Aug 2011).
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