family finances report 6 may 2012 unlocked

7/31/2019 Family Finances Report 6 May 2012 Unlocked

1/20

The Aviva FamilyFinances ReportMay 2012


2/20

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).

The Aviva Family Finances Report 2


3/20

1. Living in a committed

relationship* with no plans

to have children


relationship with plans

to have children


relationship with one child


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.



4/20

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


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


5/20

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


Q2 2011

Q2 2012


6/20

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


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


7/20

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


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.


8/20

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


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


9/20

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.




10/20

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


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


11/20

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.




12/20

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.




13/20

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.




14/20The Aviva Family Finances Report 14

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).


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%


15/20The Aviva Family Finances Report 15

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.


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.



16/20

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.



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).


17/20

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



18/20

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.


So what does this tell us?



19/20

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



20/20

family finances report 6 may 2012 unlocked

Documents