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The Aviva FamilyFinances ReportMay 2012
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The typical UK amily
The concept o the traditional amily is now outmoded and
current thinking shows that amily means dierent things todierent people. With 84% o the UK population now living
as part o a amily group, modern amilies have a signiicant
impact on the UK economy. As such, the Aviva Family Finances
Report looks at the dierent types o amily (see page 3 or
groups tracked) and their individual approaches to inances
including wealth, debt and expenditure.
In addition, this report looks at the saving habits o UK amilies and their attitudes to
cutting back. What are the irst things to go when amilies become inancially stretched
and what can they simply not do without? Here, Aviva encourages amilies to think about
their inancial priorities and how they will juggle their monthly commitments, should they
need to economise.
Overview
l Income Monthly net income rises 4% year-on-year as more amilies rely on two incomes (pg 4).
l Sources of income More primary income earners and spouses in employment (pg 4).
l Expenditure Monthly expenditure remains steady despite rising prices (pg 6).
l Family wealth Monthly savings levels rise to 45 and 76% o amilies are trying to save regularly (pg 8).
l Housing wealth Number o amilies living in their own homes rises to 69% and number o
renters alls to 19% (pg 10).
l Family borrowing Credit cards account or bulk o amilies unsecured debt (pg 12).
l Look to the future The rising cost o living remains peoples biggest ear (pg 13).
l Spotlight Families would cut back on holidays and takeaways i they were stretched inancially (pg 14).
l Spotlight Nearly a third (30%) o amilies are still concerned about beneit changes (pg 16).
l Across the UK Regional data inds the Welsh have the lowest incomes but are the most
disciplined savers (pg 17).
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1. Living in a committed
relationship* with no plans
to have children
2. Living in a committed
relationship with plans
to have children
3. Living in a committed
relationship with one child
4. Living in a committed
relationship with two
or more children
5. Divorced/separated/widowed
with one or more children
6. Single parent raising one
or more children alone
* For the purposes o this report, a committed relationship is deined as either one where two people are married or living together.
The UK modern amily
Thirty years ago, the typical UK amily was reerred to as the nuclear
amily and consisted o two parents and one or more children.However, as society has changed over time this is no longer the case.
In this report, Aviva seeks to recognise the most common types o
modern amily based on customer proiles and Government data.
The Aviva Family Finances Report 3
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Typical family incomes risingThe number o UK amilies who survive on an income o less than 1,250 per month has continued to all, dropping rom
30% in (Nov 2011), to 28% (Jan 2012), and 25% (May 2012).
At the same time, the monthly net income o the typical amily (i.e. the median amily in the middle o the sample) in the UK
is now 2,150 (May 2012), which is a 4% increase on the same time last year (May 2011 2,062).
Families have experienced a net income increase higher than the UK average (1.6%). This may be because not only are
they likely to be older (and thereore more inancially secure) than some individuals, but they are also more likely to be a
dual income household. The number o amilies receiving an income rom a primary job (i.e. income as a result o ull time
employment or the main breadwinner) has increased rom 68% (May 2011) to 72% (May 2012) over the last year and
signiicantly the number beneiting rom an income rom a spouses job has increased rom 33% (January 2012) to 36%
(May 2012) in the last quarter alone.
This increase in employment comes as igures rom the ONS show the rate o UK unemployment slowing since the start o
the year, alling 0.1% rom 8.4% to 8.3% over the quarter - the irst quarterly all in unemployment since the three months
to May 2011.
Families with children receive income boost
Remarkably much o this income boost seems to be due to amilies with children, in spite o their extra inancial
responsibilities. Families in a committed relationship with one child reported a 4% increase in monthly income rom 2,086
(May 2011) to 2,171 (May 2012), and amilies in a committed relationship with two or more children claimed an 8%
increase in monthly income rom 2,154 (May 2011) to 2,327 (May 2012).
A high proportion o these amilies derive an income rom a primary job (73% o those amilies with one child, and 71%o those with two or more children May 2012). They are also the most likely amily groups to beneit rom income rom a
partners job too (41% o those amilies with one child, and 39% o those with two or more children cite this May 2012).
Sources of monthly income
However, not all amilies have seen a rise in income, with divorced/separated/widowed parents reporting a 7% all in average
monthly income over the last year (rom 1,138 May 2011) to 1,060 (May 2012). Single parent amilies also saw incomes
all by 8% (rom 874 May 2011) to 805 (May 2012). Even though annual inlation ell rom 3.5% in March to 3% in April2012, it still means that in real terms this decrease in incomes is actually even larger.
Income
The Aviva Family Finances Report 4
Living with partner
and dont plan to
have children
Living with partner
and plan to have
children
Living with partner
with one child
Living with partner with
two or more children
Divorced /separated/
widowed and
raising one or more
children alone
Single and raising
one or more children
alone
77% 82% 73% 71% 57% 52%
35% 39% 41% 39% 1% 0%
Income rom primary job Income rom partners job
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Other sources of income:
The average number o amilies who obtain income rom part-time or second jobs has remained steady in the
last quarter. The most likely amilies to report this type o employment are those who are married with two
or more children. O this amily type, 13% o primary earners also hold a second job, while 7% o partners in
this group hold at least two jobs.
The number o UK amilies who rely on beneits to provide a proportion o their monthly income has allen
to 18% (May 2012) rom 22% (Jan 2012) and 23% (May 2011). However, this igure has allen signiicantly
more or one-parent amilies.
l The proportion o divorced/separated/widowed parents relying on beneits has allen rom 47%
(Jan 2012) to 43% (May 2012).
l The proportion o single parent amilies relying on beneits has allen rom 50% (Jan 2012) to 42%
(May 2012).
With incomes alling or these two groups, this suggests that the beneit reorms are having an impact on
amilies inances.
A more detailed analysis o the impact o Government beneit reorms can be ound in the spotlight section
on page 16.
Despite the continued volatility o the global economy and the Euro crisis, savings and investments provide
8% o UK amilies with some orm o income (up rom 7% in May 2011), although this report does not
determine whether this is income rom growth or rom using the capital.
% of people on different income levels
0%
5%
10%
15%
20%
25%
30%
35%
More than 5,0012,501-5,0001,251-2,500751-1,250750 or less
The Aviva Family Finances Report 5
Q2 2011
Q2 2012
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Expenditure holds firm as families adjust spending prioritiesThe average monthly expenditure o UK amilies has remained remarkably steady over the last 12 months and stands at 1,680
in May 2012 (1,681 May 2011). However, the impact o rising inlation (annual CPI inlation 3.5% March 2012) on the cost
o essential goods and services means the typical shopping basket has become more expensive. This suggests that to maintain the
same level o spending, amilies are economising and shopping around.
This is supported by the act that expenditure habits have changed only very slightly. Rather than cutting back in one particular area,
amilies appear to have economised across the board. So, while annual inlation on clothing and ootwear is high (10.4% May
2012) the average amount spent here has allen rom 3% (May 2011) to 2% (May 2012).
Likewise, while annual inlation on leisure services is 2.5%, the amount spent on recreation, entertainment and holidays has allen
rom 5% (May 2011) to 4% (May 2012). Families are also reining in borrowing, with debt repayment staying constant at 9% o
monthly expenditure (May 2012), which is the same as Q1 2012, but down rom the peak o 10% in May 2011.
Spending on ood remains the second largest single monthly expense, rising slightly on the past three quarters rom 10% (August
2011) to 11% (May 2012). With ood inlation running at 4.69% this supports the view that amilies are keeping costs down by
choosing more value brands.
Housing costs fall
The biggest single year-on-year change is the average amount spent on housing (mortgage or rent), which has allen steadily
over the last year rom 22% (May 2011) to 19% (May 2012). This is probably as a result o historically low mortgage rates and a
subdued housing market. However, with increasing money market costs in Q1 2012 pushing lenders to increase mortgage rates, it
remains to be seen what impact this will have in the uture.
Typical family expenditureAverage amount spent as a % of monthly expenditure
Expenditure
The Aviva Family Finances Report 6
Housing
(mortgage
or rent)
Food Debt
repayment
Nursery care /
out o
school care
Energy bills
(e.g. gas and
electricity)
Motoring Entertainment,
recreation
and holidays
Public transport
ares and other
travel costs
Fees or
childrens
activities
Clothing and
ootwear
Type of expenditure
19% 9% 5% 4% 3%4%9% 6%11% 2%
20% 9% 5% 4% 1%4%9% 5%10% 2%
20% 9% 5% 4% 3%3%9% 6%10% 2%
21% 9% 5% 4% 3%4%10% 5%10% 2%
22% 10% 6% 4% 4%5%10% 6%11% 3%
May 2011 Aug 2011 Nov 2011 Jan 2012 May 2012
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Spending trends
Despite the act that housing is a basic essential need, the number o amilies who say they do not spend money on housing has
been increasing. In August 2011, 20% o amilies said they didnt spend money on housing, suggesting they either own their
own home outright, or live in council accommodation. This igure has risen to 22% (May 2012) o amilies who say they are not
spending any o their income on housing.
The number o people who live in a home they own outright has increased rom 15% (Jan 2012) to 16% (May 2012) which
accounts or part o this. But with 18% (May 2012) o amilies receiving some beneits, and no new surge in the availability o social
housing, this suggests more amilies are receiving inancial support or choosing to live with amily (1% May 2012) to keep down
accommodation costs.
Cutting back on non-essential items
The percentage o UK amilies choosing to budget rather than spend money on non-essentials has increased. The number o amilieswho say they are spending nothing on entertainment, recreation and holidays has increased rom 21% (Aug 2011) to 24% (May
2012), and the number o amilies who dont eat out or buy takeaways has increased rom 18% (Aug 2011) to 21% (May 2012).
It is also interesting to note the number o amilies who say they spend nothing on debt repayments has increased rom 42% (Aug
2011) to more than hal (53% May 2012) in less than a year. With the amount o unsecured debt alling rom 10,418 (Jan 2012)
to 9,314 (May 2012), this suggests more amilies are seeking to pay down their debts, thus reeing up uture income.
Percentage of families who spend nothing on this expense on a monthly basis
Many UK amilies have seen their incomes rise over the last year, which is partly
as a result o higher employment levels. As people earn more, the latest Aviva
Family Finances Report fnds there has been a clear shit towards amilies managing
expenditure. This suggests they are looking more closely at debt repayments,
day-to-day spending, and saving or the uture.
Richard Kelsall, head o savings, Aviva
The Aviva Family Finances Report 7
Debt repayment Entertainment, recreation
and holidays
Public transport ares
and other travel costs
Fees or childrens
activities
Leisure goods Eating-out
and takeaways
Type of expenditure
53% 34% 21%51% 39%24%
48% 34% 23%50% 42%30%
48% 33% 20%52% 39%25%
42% 30% 18%51% 36%21%
Aug 2011 Nov 2011 Jan 2012 May 2012
With annual inlation or uel costs and energy running at 11.31%, current concerns about rising bills are yet to be translated into a
signiicant increase in monthly expenditure. However, as amilies are already economising wherever possible, this is likely to have an
impact on their average monthly expenditure.
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Savings levels increasing despite the financial squeezeUK amilies are making a concerted eort to save money where possible and 76% (May 2012) say they have some savings
compared to the 72% (May 2011) who said this a year ago.
Despite the rising cost o living, there has also been an increase in the average amount people are setting aside each month. The
average amount being saved on a monthly basis is 45 (May 2012) up 41% year-on-year rom 32 (May 2011).
The average (median) amount held in savings and investments (excluding pensions and property) by UK amilies is 1,228 (May
2012). This is a 6% year-on-year increase rom 1,163 in May 2011.
The two amily groups who are least likely to be saving money each month remain single parent amilies and those who are
divorced/separated/widowed. A worrying 65% o single parents (May 2012) and 52% o divorced/separated/widowed parents (May
2012) are not saving anything on a monthly basis.
Across the UK, the average number o amilies who are not saving anything on a monthly basis is 33% (May 2012). While this
number has allen over the last year (rom 37% May 2011) the number o single parents (65% May 2012) and divorced/
separated/widowed parents (52% May 2012) who are not saving has remained steady. This suggests there is a core o amilies
(potentially on the lowest incomes) who are unable (or even unwilling) to save.
Looking at saving by gender there is a clear divide between men and women. The average (median) man questioned saves more
than double the typical amount put aside by the average woman (70 vs. 32 May 2012). In addition, 38% o women say they
dont manage to save anything on a monthly basis (May 2012) compared to just 28% o men (May 2012). While the amounts being
saved by both sexes have increased over the last 12 months, the dierence between the two has remained more than double (55
(men) vs. 25 (women) May 2011).
Perhaps even more signiicantly, the percentage o men who save nothing on a monthly basis (28% May 2012) has allen by three
percentage points rom 31% (May 2011) whereas the percentage o women not saving (38% May 2012) has come down just one
percentage point rom 39% (May 2011).
Anecdotal evidence suggests that women are more likely to use their income or day-to-day expenditure, whereas mens income is used
more to pay regular monthly bills and or making savings and investments so this could be one o the reasons behind this split.
Family wealth
The Aviva Family Finances Report 8
Couples without
plans to have
children
Couples with plans
to have children
Couples with
one child
Couples with
two children
Single, raising one
or more children
Divorced/Separated/
Widowed with one
or more children
Percentage of families saving nothing
39% 24% 31% 41% 51% 65%
32% 21% 27% 35% 52% 65%
Q2 2011 Q2 2012
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Growing use of financial products across family groupsIn terms o inancial and savings products used by UK amilies, it has been a positive 12 months, with 84%
o amilies now having a basic bank/building society savings account (May 2012) compared to 80% at this
time last year (May 2011).
There is more good news in that, over the last 12 months, it would appear more amilies have taken out
lie insurance up rom 38% (May 2011) to 42% (May 2012). Likewise the number o amilies with critical
illness cover is up rom 13% (May 2011) to 14% (May 2012). However, the number with private health
insurance is static at 13%, and the number with income protection insurance is actually down rom 11%
(May 2011) to 9% (May 2012).
The number o amilies with a private pension has increased rom 17% (May 2011) to 19% (May 2012).
In addition, 40% now (May 2012) have at least one ISA (34% May 2011), while 16% (May 2012) have
stocks and shares investments (14% May 2011).
Products such as ISAs are most commonly held by amilies with incomes above the monthly average o
2,150 (May 2012). They are most popular among those amilies in a committed relationship who dont
plan to have children (44% May 2012) and least common among single parent amilies (12% May
2012).
It is a similar story or those amilies who have made provisions or their pension. On average 19% o UK
amilies have a private pension (May 2012) compared to 17% in May 2011. And 38% actively hold an
employer pension (May 2012) compared to 34% in May 2011.
However, just 15% o divorced/separated/widowed parents (May 2012) and just 3% o single parentamilies (May 2012) currently have a private / employer pension. With auto-enrolment soon to be rolled out
across the UK, these igures are likely to increase or all types o amilies.
The latest Family Finances Report has ound that over the last 12
months a growing number o amilies are trying to save money on
a regular basis and as a result, a greater number now have larger
savings pots. In addition, more amilies say they now have pensions,
savings accounts, and ISAs, which suggests they are reacting to the
difcult fnancial situation and seeking to provide a buer to protectthemselves and their loved ones.
Richard Kelsall, head o savings, Aviva
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Housing equity increases for familiesThe latest Aviva Family Finances Report inds more than two-thirds o amilies (69% May 2012) live in homes they either own
outright (16% May 2012) or with a mortgage (53% May 2012). A urther 19% live in private rental accommodation (May
2012), 11% live in social housing (May 2012), and 1% say they live with their amilies (May 2012).
Over the last year the percentage o amilies who live in their own homes has increased rom 63% (May 2011) to 69% (May 2012)
and at the same time the number o people living in private rental accommodation has allen rom 23% (May 2011) to 19% (May 2012).
The latest igures rom the Haliax House Price Index show the average residential property in the UK is now worth 159,883.
However, the value o the typical amily home (owned outright or with a mortgage) is worth considerably more at 212,324
(May 2012), due to the act that they tend to be larger-than-average properties.
Over the last year the value o the average amily property has actually increased by 3.5% (rom 205,144 May 2011), whereasthe Haliax data shows the average house price (which includes all types o properties) remains almost lat (-0.5%) when compared
to the same time last year.
Housing wealth
The Aviva Family Finances Report 10
Average value of house per family type
Couples without
plans to have
children
Couples with plans
to have children
Couples with
one child
Couples with
two children
Divorced/Separated/
Widowed with one or
more children
Single, raising one
or more children
195,082225,592
205,869191,839204,919
111,111
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Average equity levels on the riseAverage equity levels have increased in the last year, rising 5.3% to 136,445 (May 2012) rom 129,586
(May 2011), while at the same time the average amily mortgage has increased just 1.9% rom 97,408
(May 2011) to 99,237 (May 2012). Taken together this suggests that amilies are beneiting rom rising
house prices which are increasing the amount o equity in their homes, while at the same time managing
to keep on top o mortgage repayments.
However, separate research rom Avivas latest Real Retirement Report (Spring 2012) shows that despite
historically low mortgage rates, rising inlation has meant amilies are increasingly stretched inancially and
have turned towards their parents and grandparents or help. Almost a third (31%) o the UKs over-55s
have provided money to their riends and amily in the last 12 months, speciically to help them to pay
debts/bills. So the positive inancial position o some younger people may be in part due to amily assistance.
Typical home-owning families
The amilies most likely to own their own homes with a mortgage are those who are married/in a committed
relationship with children - one child (56%) and two or more children (57%). Those amilies who are married/
in a committed relationship and dont plan to have children are the most likely to live in a home they own
outright (22% May 2012), potentially as they are older inhabitants.
Single parent amilies raising children alone are the most likely to be living in social housing
(33% May 2012) and also the most likely to be living at home with their amilies (9% May 2012).
On a separate issue, the number o amilies who own a second property has increased rom 15%
(May 2011) to 16% (May 2012) with those couples who are planning to have children being the mostlikely to do so (21% May 2012). This is possibly because those who are planning a amily are younger
and may have moved in together while one partner kept their own property or example, to rent out.
There appears to have been an increase in the number o amilieswho live in their own homes as opposed to renting. With mortgage
rates at historic lows and house prices steadying, this has encouraged
more amilies to climb onto the property ladder. However, there are
concerns that rates will begin to rise and amilies need to make sure
they plan or all contingencies and protect themselves accordingly.
Richard Kelsall, head o savings, Aviva
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Debt levels rise in last 12 months but begin to fall backThe typical UK amily currently owes 9,314 (or 36% o typical annual household income (25,800 May 2012) in unsecured debt
(credit cards, personal loans, hire purchase, overdrat, store cards etc) which is being repaid on a monthly basis. Borrowing has
increased rom 5,878 (May 2011) but allen rom 10,418 (Jan 2012), suggesting that amilies are ocusing on paying down debts
ater the estive season.
The biggest unsecured debt owed by UK amilies is credit card debt, with an average o 2,266 (May 2012). The next two most
signiicant sources o unsecured debt are personal loans (1,895 May 2012) and overdrats (1,650 May 2012).
Families who plan to have children owe the most on credit cards on average (3,034 May 2012), whereas single parent amilies
owe the least (602 May 2012).
On average the largest source o unsecured debt or single parent amilies is personal loans (739 May 2012), whereas or those
parents who are divorced/separated/widowed the largest single source o debt is loans rom amilies and riends (1,435 May 2012).
Short-term worries over their abilities to keep up with debt repayments have allen over the year, as only 9% o amilies cite this as aconcern (May 2012) compared to 14% (May 2011). This adds credibility to the argument that they are tackling borrowing head on.
Couples without
plans to have
children
Couples with plans
to have children
Couples with
one child
Couples with
two children
Single, raising one
or more children
Divorced/Separated/
Widowed with one
or more children
Average family debt compared with income
3,3905,6354,6879,42513,0339,012
8051,0602,3272,1712,4992,244
Average debt Average monthly household Income
Family borrowing
It is positive that as well as an increase in savings, there has been a all in amilies
unsecured debts. The Aviva Family Finances Report shows amilies are worried about
their debts and it is reassuring to see they are being proactive and tackling the issue.
Families are under pressure rom all sides, but servicing debts is crucial i they are to
be reduced and eventually paid o.
Richard Kelsall, head o savings, Aviva
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The sum of all fears
The top three short term ears (over the next six months) or amilies are: a signiicant increase in the price
o basic necessities (57% May 2012), losing job/s (47% May 2012), and unexpected expenses
(41% May 2012).
These ears are consistently the biggest concerns or amilies, who have numerous commitments and a
relatively static income with which to cover their costs. Over the last year short-term ears over essential costs
have allen slightly (down three percentage points rom 60% May 2011) as has the ear o redundancy
(down one percentage point rom 48% May 2011) suggesting amilies are eeling more conident about the
economic situation than they were this time last year.
While concerns about the cost o basic necessities has allen overall, single parent amilies who have the
lowest incomes are increasingly concerned (up 15 percentage points rom 58% May 2011) as they struggle
to make ends meet. UK amilies are also more concerned about how they will pay or unexpected expenses
(up two percentage points rom 39% May 2011) as they look to devote any spare income to savings/debt
repayment.
Worries about long term unemployment have allen rom 10% (Jan 2012) to 7% (May 2012) over the last
quarter. This is in line with latest Government data which shows the rate o unemployment is slowing and
jobs are being created in certain sectors.
It may also go some way to explain why more people are concerned about unexpected expenses, as with
unemployment oten comes debt. This potentially means that those who are newly employed are likely to
worry about an unexpected expense de-railing their plans to repay borrowing.
Concerns around the impact o changes to Government beneits have receded slightly (22%
May 2012 vs. 24% May 2011) as more people gain employment and are less dependent on the state.
Look to the uture
The three most common concerns remain ears over the rising price
o basic necessities, losing a job, and unexpected expenses. However,
over the last 12 months, worries about the rising cost o living and
the risk o unemployment have begun to recede slightly as incomes
have increased and unemployment is slowing. This said, planning or
the worst in the good times can provide an element o protectionshould the situation change, so as the adage goes, hope or the best
and prepare or the worst.
Richard Kelsall, head o savings, Aviva
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Spotlight Saving habits and theimplications o spending cutbacks
In this report Aviva has speciically examined the savings habits o UK amilies. This section looks at what prompts people to put
money aside, and what they would (or wouldnt) be prepared to go without to boost their savings.
Disorganised saving
While more amilies than ever now have some orm o savings (76% May 2012), how they save (not including pension savings)
remains ad hoc in the main. Just under a third (32%) save regularly each month (May 2012) 13% via set direct debits and 19%
through a speciic amount set aside each month. However, 23% o amilies say they save as and when they can (May 2012), and
18% look at their bank account at the end o the month and save the remainder (May 2012).
There is little dierence between the amily groups as to how they choose to save money. For example, 24% o two-parent amilieswith two or more children say they save as and when they can, compared to 15% o single parent amilies who say the same (May
2012). However, the dierence is that just 35% o amilies in a committed relationship with two or more children dont manage to
save anything each month, compared to 65% o single parent amilies.
Financial priorities shaping expenditure decisions
Competing inancial pressures have caused many amilies to eel the pinch recently, with a third o amilies (33% May 2012)
saying they cannot aord to cut their expenditure urther. This again rises to 65% o single parent amilies.
With the cost o goods rising aster than incomes and the Government making cuts to beneits, UK amilies are being more careul
with their expenditure. However, comparing incomes and essential expenses, on average 67% o amilies admit they could make
urther cutbacks i necessary (May 2012).
The Aviva Family Finances Report 14
Couples without
plans to have
children
Couples with plans
to have children
Couples with
one child
Couples with
two children
Divorced/Separated/
Widowed with one or
more children
Single, raising one
or more children
How families save
Set up a direct debit Set aside speciic amount As and when they can
Look at bank account at end
o month and save remainder
Dont save on a monthly basis
19% 21% 18% 16% 18% 6%
6% 3% 4% 4% 5% 3%
23% 21% 22% 24% 23% 15%
18% 26% 20% 18% 10% 18%
13% 11% 13% 13% 10% 9%
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And i they cut spending back to the bone, the typical amount they could aord to save is an extra 53 a month (May 2012). This
is still a relatively low amount and shows how little leeway many amilies have to make savings. Those couples with plans to have
children could aord to cut back the most, saying they could ind an extra 72 a month i necessary, whereas divorced/separated/
widowed parents could typically only ind an extra 6 a month and most single parents are already ully stretched and could not
ind any more money.
Making sacrifices
The Family Finances Report also looked at the top three spending cuts amilies would make i they had to reduce outgoings. The most
common sacriices are related to entertainment, with the number one sacriice amilies would make being their summer holiday (30% May 2012).
This was ollowed by cutting back on regular takeaway meals (at least once a week) (26% May 2012), and starting to buy
supermarket basics ranges (25% May 2012). However, other common cutbacks would be around the number o days out as a
amily (20% May 2012), and giving children less expensive presents on birthdays/other special occasions (13% May 2012).
These igures may seem relatively low but many amilies are likely to have already made some or all o these.
What three spending cuts would your family make first if finances become stretched?
We would not go on a summer holiday 30%
We would stop having regular take-away meals (at least once a week) 26%
We would start buying the basics ranges in the supermarket 25%We would not have the heating on as much 23%
We would stop drinking alcohol during the week 22%
We would give up our cable / satellite TV package 20%
We would cut back on the number of days out we do as a family 20%
We would use the car less / walk more 17%
We would give my children less expensive presents on birthdays/other special occasions 13%
We would stop going to the cinema regularly 10%
It is interesting to note that little and oten luxuries were oten kept, with a coee (6%) and breakast (4%) on the way to work,
much lower on the list o which items people would be prepared to give up. This suggests people dont believe stopping these costs
will amount to much o a dierence. However, even a 1.99 coee every working day adds up over a year.
A quick calculation shows this would total 477.60, which would represent a signiicant saving i even a small change was made.
The Aviva Family Finances Report 15
While 67% o amilies believe they would be able to make cuts to their
expenditure i necessary, there is not much room or manoeuvre. I they cut
spending to the bone the typical amount amilies could aord to save is an extra
53 each month less than a typical tank o uel. However, even small amounts
can grow into substantial sums over time, so wed encourage amilies to consider
careully whether to spend or save any spare cash.
Richard Kelsall, head o savings, Aviva
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Benefit changes
It is anticipated that the changes to the state beneits system will mean upheaval or thousands o amilies across the UK.
So its interesting that the report inds 48% o amilies do not believe they will have any impact on them inancially (May 2012).
Nevertheless, there are still many more amilies who are concerned about the inancial impact. A urther 30% are worried the
changes will mean they ind it harder to make ends meet (May 2012), with 17% anticipating they will have to cut back on little
luxuries or their children (May 2012). More seriously, 16% say it will mean they will be able to put less money into savings
(May 2012), and 14% believe they will have to cut back on essentials or the amily (May 2012).
As a result it would be understandable i amilies held strong views about the changes to universal beneits such as child
beneit. However, while a minority (21%) say they eel child beneit should be available to everyone, the majority accept
that changes need to happen. Almost a third (32% May 2012) say the system is unair and needs proper reorm, 28%
(May 2012) support the changes, saying those earning a lot do not need the money and 21% (May 2012) say the system
was not designed to cover everyone.
However, how the system should change was a bone o contention and 32% (May 2012) eel that the proposed limit is biased
against some amilies. Unsurprisingly, those in a committed relationship with two or more children are most likely to eel this
way (36% May 2012).
Families views on proposed cuts to child benefits:
The way the proposed limit is calculated is biased against some amilies 32%
The system is unair and needs proper reorm 32%
I support the changes as those earning a lot dont need it 28%Child beneit should be a universal beneit available or all parents 21%
The system was not designed to cover everyone - just those in need 21%
I fnances are becoming stretched then the reality is that something has to give,
and amilies need to decide realistically where they can cut back. Families show they
are generally level-headed about what they would do without. Many say they would
consider cutting back on holidays and takeaways. But its interesting that big ticket
items would be the frst to go, whereas people are more reluctant to drop smaller
items like a daily coee, even though the cost over a year can be signifcant.
Richard Kelsall, head o savings, Aviva
The Aviva Family Finances Report 16
Never going to give it upDespite the impact o the inancial crisis on amilies inances over the last couple o years, there are certain priorities that all amilies
either just cannot live without or recognise that they are too important to let go.
While 24% o amilies were adamant they would be willing to make all necessary cuts, it was encouraging to see that many amilies
would prioritise their uture inancial security beore almost everything else. Fourteen per cent say they would not stop paying into a
pension and 14% say they would not cut back on protection insurance policies. This igure was lower or divorced/separated/widowed
parents (10% May 2012) and single parents (6% May 2012), but they are less likely to have these products in the irst place.
To show how signiicant this commitment is, this report reveals that 34% o amilies are currently paying into a pension (either private or
employer led). And in terms o protecting themselves, 42% have a lie insurance policy and 14% have critical illness cover (May 2012).
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The amilies with the highest averageincomes in the UK tend to live in the
capital. The average monthly income o
the typical amily in London is 2,839
(May 2012), which represents a 12%
year-on-year increase (2,544 May
2011). Families in the South East enjoy
the second highest incomes in the UK at
2,487 (May 2012), although they have only
seen a 2% year-on-year increase. The lowest
average monthly incomes are ound in Wales
where the typical amily takes home 1,741
per month (May 2012).
Assets
London amilies are also most likely to
have put away the most in savings, with an
average o 3,332 saved (May 2012), ollowed
by amilies in the East (1,665), and the North
West 1,544 (May 2012). However, amilies in the
South East are the most disciplined on average, with
16% saving by direct debit each month, compared to a
UK average o 13% (May 2012).
Families living in London have also accrued the most unsecured
debt, owing 19,479 on average (May 2012), whereas this igure
is just 3,767 in the East Midlands (May 2012).
Housing
Family houses in the North East are valued at the lowest in
the UK, with an average cost o 154,478 (compared to a UK
average o 212,324 May 2012). Family houses in London
are the most expensive, with the average house valued at
311,391 (May 2012).
Understandably, London dwellers are less likely to owntheir own home (either outright or with a mortgage) than
a amily in Yorkshire, where the average amily home is
valued at 180,042 and the homeownership rate is the
highest in the UK at 80% (May 2012). The average
amily home in Wales is valued at 190,341, however
Welsh amilies are the least likely to own their own
home) (55% May 2012), and the most likely to be
living with their amily (4% May 2012).
Families rom the East are the most likely to believe
that changes to the beneits system will not impact
them inancially (57%), ollowed by Yorkshire(54%), and Scotland (51%) (May 2012).
N. EastN. West
Scotland
Wales
S. West
S. East
London
East
E. Midlands
W. Midlands
Yorkshire
The view across the UK
154,478
311,391
180,042
171,818
231,436
10,284
19,479
4,982
3,767
6,417
1,987
2,839
2,268
1,907
2,122
181,630
174,645
190,341
167,159
222,625
269,141
3,851
4,918
6,345
5,860
4,072
5,703
2,089
2,099
1,741
2,154
2,249
2,487
Income
Typical amily debt
House prices
212,324
9,314
2,150
UK
The Aviva Family Finances Report 17
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In this edition o the Aviva Family Finances Report we examine amilies
attitudes to savings and specifcally how these views may be aected in light o
reductions to state benefts.
Its clear rom our research series that amilies have a multitude o money
pressures to contend with, so its no surprise to see that savings can sometimes
all way down the priorities list. But its reassuring to see in this latest edition
that more amilies are getting used to the idea o regular saving and more are
starting to put money aside or the uture.
With unsecured debt repayments, mortgages, ood, and uel costs all putting
pressure on the typical UK amilys fnances, it would seem there is little scope or
cost-cutting. But its good to know that the majority o amilies eel they could
make changes which would enable them to put away some cash on a monthly
basis albeit small amounts.
Making a plan to save on a regular basis or the
uture can help to give some peace o mind. And i
amilies scrutinise their spending and eel that they
could make cut-backs in some areas, small changescan quickly mount up.
Little luxuries and treats have their place, but
building up savings pots creates a fnancial saety
net and could prevent emotional distress should
unexpected costs come in.
Richard Kelsall, head o savings, Aviva
So what does this tell us?
The Aviva Family Finances Report 18
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Methodology
The Aviva Family Finances Report was designed and produced by Wriglesworth Research. As part o this 12,164* UKconsumers aged between 18 and 55 who live as part o one o six amily groups were interviewed by Opinion
Matters between December 2010 and April 2012. This data was combined with additional inormation rom the
sources listed below and used to orm the basis o the Aviva Family Finances Report.
Additional data sources include:
Income igures Oice o National Statistics April 2012
Unemployment Figures Oice o National Statistics April 2012
Haliax April House Price Figures
Standard & Poors Mortgage Arrears Report
Aviva Real Retirement Report Spring 2012
Technical notes
l A median is described as the numeric value separating the upper hal o a sample, a population, or a probability
distribution, rom the lower hal. Thus or this report, the median is the person who is the utter middle o a sample.
l An average or mean is a single value that is meant to typiy a list o values. This is derived by adding all the values
on a list together and then dividing by the number o items on said list. This can be skewed by particularly high or
low values.
For urther inormation on the report or or a comment, please contact Sarah Poulter at the Aviva Press Oice on
01904 452828 or [email protected]
* = Minimum o 2,000 per quarter
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