The Aviva FamilyFinances ReportJanuary – 2013
The typical UK familyThe diversity of modern society means there is no singlemodel of the ‘traditional family’ in the UK. ...
The modern UK familyThirty years ago, the typical UK family was referred to asthe ‘nuclear family’ and consisted of two pa...
IncomeThe typical monthly net income among UK families rose slightly in the last quarter to £2,043, up by £40 (2%) from Au...
ExpenditureFor the fourth consecutive quarter, typical monthly expenditure by UK families grew, with current typical outgo...
During the same period, average debt repayments have also increased by almost £20 a month and nearly£240 a year. With more...
Family wealthDespite increased outgoings, it is encouraging to see that the typical family’s savings are at their highest ...
A further sign of improved savings habits comes from the falling percentage of families putting no savings asidefrom month...
“Making regular savings is fundamental to achieving financial stability  and guarding against unexpected expenses or life e...
Housing wealthHomeownership by UK families – either outright or with a mortgage – fell from 61% (August 2012) to59% (Janua...
The typical mortgage among families, for those that have them, has also risen to £107,820 and is againthe highest figure r...
Family borrowingThe typical UK family owes £11,101 in unsecured lending in January 2013, which has grown from £10,563in Au...
A look to the futureThe increasing cost of basic necessities (56%), the threat of job losses (45%) and unplanned expenses ...
Spotlight: the challenges facinga modern young familyIn 2011 723,913 children were born, 18% more than a decade ago (2001 ...
Laying the foundations for a young familyWhen it comes to financial planning for family life, considerably more activity t...
Balancing the family booksFinancial priorities change dramatically with a young family, and four in five families (81%) ha...
The added financial pressures of raising a young family are evident in the fact that 44% of parents worryabout their incom...
Drawing the line on family planningHaving experienced the financial pressures of raising a young family, modern parents ha...
The children of modern young families face a very different future to their parents, with average annualuniversity tuition...
The view across the UKSummaryWhile families in London (£2,231) and the South East (£2,211) continue to have the highest in...
Average monthly income                                                                                                    ...
So what does this tell us?“This edition of the Aviva Family Finances Report suggests that while incomeshave risen among UK...
MethodologyThe Aviva Family Finances Report was designed and produced by Wriglesworth Research. Over 2,000 people aged18-5...
GN 20 644 01/2013   © Aviva plc
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The Aviva Family Finances report - January 2013

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The Aviva Family Finances Report looks at the contrasting experiences of different family types. As well as tracking this data over time, this edition also examines the challenges facing a modern young family. How does raising children impact parents’ approaches to work and ambitions? What financial decisions do they face? When do they make them and what compromises do they make? How much pressure do they experience in comparison to their own parents, and what do they predict for the financial prospects of their children?

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The Aviva Family Finances report - January 2013

  1. 1. The Aviva FamilyFinances ReportJanuary – 2013
  2. 2. The typical UK familyThe diversity of modern society means there is no singlemodel of the ‘traditional family’ in the UK. Instead,with 84% of the population living as part of a modernfamily group, their social and economic experiences areinfluenced by a range of variables which shape theirattitudes towards family, work and financial planning.The Aviva Family Finances Report looks at the contrasting experiences of different familytypes (see page three for groups tracked). As well as tracking this data over time, thisedition also examines the challenges facing a modern young family. How does raisingchildren impact parents’ approaches to work and ambitions? What financial decisions dothey face? When do they make them and what compromises do they make? How muchpressure do they experience in comparison to their own parents, and what do they predictfor the financial prospects of their children?All of these questions and the resulting answers paint a picture of a modern family strivingto balance its daily needs with the desire to support its children’s futures.Overview l Income – committed couples with plans for children stay ahead as incomes register a rise (pg 4). l Expenditure – monthly expenses bloated by debt repayment and rising transport and fuel costs (pg 5). l Family wealth – saving pots grow as families make a concerted effort to put more aside each month (pg 7). l Housing wealth – homeownership falls as families increasingly shift to rented properties (pg 10). l Family borrowing – debt levels grow, but fewer families are drawing on credit cards, loans and overdrafts (pg 12). l Look to the future – financial fears hold fast or shrink as families grow accustomed to making ends meet (pg 13). l Spotlight – more first-born children are spending their early years in rented accommodation (pg 14). l Spotlight – today’s parents of young families face far greater financial pressure to support their children’s futures (pg 18). l Across the UK – Londoners have the UK’s largest monthly incomes and most valuable homes – and the most relaxed attitudes to long-term financial security (pg 20). The Aviva Family Finances Report 2
  3. 3. The modern UK familyThirty years ago, the typical UK family was referred to asthe ‘nuclear family’ and consisted of two parents and oneor more children. However, as society has changed overtime this is no longer the case. In this report, Aviva seeks torecognise the most common types of modern family basedon customer profiles and Government data. 1. Living in a committed 2. Living in a committed 3. Living in a committed relationship* with no plans relationship with plans relationship with one child to have children to have children 4. Living in a committed 5. Divorced/separated/widowed 6. Single parent raising one relationship with two with one or more children or more children alone or more children* For the purposes of this report, a committed relationship is defined as either one where two people are married or living together. The Aviva Family Finances Report 3
  4. 4. IncomeThe typical monthly net income among UK families rose slightly in the last quarter to £2,043, up by £40 (2%) from August 2012and by £60 (3%) compared with November 2011. The highest earning families continue to be those in committed relationshipswith plans to have children (£2,265).Typical family incomes by family type in January 2013 £2,065 £2,265 £1,932 £2,216 £1,124 £1,239 Living with partner Living with partner Living with partner Living with partner with Divorced/separated/ Single and raising and don’t plan to and plan to have with one child two or more children widowed and one or more children have children children raising one or more alone children aloneLooking at families with children, those with two children have the largest typical monthly incomes of £2,016, followedby one-child families on £1,989 and £1,818 for three-child families. The fact that four-child families are typically survivingon the lowest monthly net incomes – £1,600 – suggests they will be particularly pressured financially unless their numberincludes adult children who are supporting themselves.This quarter saw no movement at either end of the income scale since August 2012, with the number of families survivingon less than £1,250 (22%) or earning more than £2,500 (31%) remaining stable. However, compared with November2011, when 30% earned less than £1,250 while 36% took home more than £2,500, the situation seems more positivefor lower earners in terms of income growth.Income sourcesThe number of UK parents drawing income from a primary breadwinner’s main job has fallen slightly from 72% (August2012) to 70% (January 2013). However, the number of families drawing on a spouse’s primary job has increased from32% (November 2011) to 34% (January 2013) suggesting a slight growth in the number of families with two workingparents. Secondary or part-time work remains an income generator for 18% of families, as it was back in January 2011.Other sources of incomeBenefits are a source of income for 21% of UK families in January 2013, compared with 20% in August 2012 and 23%in November 2011. Predictably, this differs depending on family type, and this latest figure for January 2013 includes26% of families with children, compared with just 11% of families without.It is also interesting that, over the last year, the number of divorced, separated or widowed parents receiving benefits hasshrunk from 41% to 34%, with some welfare cuts having taken effect. In contrast, around half of single parents with soleresponsibility for raising their family are consistently drawing on benefits (52% – January 2013 vs. 51% – November 2011).The percentage of families receiving income from savings and investments rose to 7% this quarter, from 6% in August2012. The impact of raising children on the typical family’s ability to save and invest means those without children aremore likely to draw an income from this source (9%) than those with (6%). The Aviva Family Finances Report 4
  5. 5. ExpenditureFor the fourth consecutive quarter, typical monthly expenditure by UK families grew, with current typical outgoingsof £1,819 up by 3% from £1,765 in August 2012 and 22% higher than in November 2011 (£1,488.56).While annual inflation stood at 2.7% in October 2012, the impact of rising living costs is clearly visible overthe last twelve months. With the average price of rail fares increasing by 5.9% in January 2012, combinedwith 4.96% inflation, expenditure on day-to-day travel has grown more than any other cost since November2011, with the typical UK family spending £341 more every year to meet this need. A further average pricerise of 3.9% in January 2013 means this is likely to increase in future.Inflation on energy bills has been -0.57%, but with utilities providers raising prices across the board,increased costs are draining an extra £221 from household budgets every year. In addition, despite own-brand labels and budget supermarkets having grown in popularity during the recession, outgoings on foodshopping are rising. Inflation of 3.13% means the typical family now spends £234 more on annual food billsthan they did in November 2011.Largest increase in essential monthly expenses November 2011 – January 2013 Increase Increase Nov 2011 Jan 2013 per month per year* Public transport fares £85.60 £114 £28.40 £340.80 and other travel costs Leisure goods such as £50.07 £76 £25.93 £311.16 sports equipment or CDs Debt repayment £224.05 £244 £19.95 £239.40 Furniture, appliances £59.55 £80 £20.45 £245.40 and pet care Food £253.54 £273 £19.46 £233.52 Fuel and light (e.g. gas £135.57 £154 £18.43 £221.16 and electricity bills)* Based on the monthly increase over a 12-month period – please note that some expenses are subject to seasonal changes. The Aviva Family Finances Report 5
  6. 6. During the same period, average debt repayments have also increased by almost £20 a month and nearly£240 a year. With more pressure on their finances, families are instead making efforts to cut back onnon-essential spending. Changing priorities have impacted the number of families who spend on a rangeof non-essential items each month, while the figures also suggest that a significant number of parents aresacrificing motoring costs to reduce their outgoings.Biggest declines in the % of people who spend on a certain expense 94% 88% 61% 55% 81% 76% 70% 62% 90% 85% 77% 72% Furniture, appliances Leisure goods such Postage, telephone Clothing and footwear Personal goods and Motoring and pet care as sports equipment calls and internet services such as make-up or CDs connections and medicine Type of expenditure Nov 2011 Jan 2013 “While family incomes have risen slightly, the impact of inflation and price rises from transport and utilities suppliers means that few families will enjoy the benefits of extra ‘disposable’ income to spend on luxury items. In the interests of building a stable foundation for their future, it is encouraging to see that these growing expenses have not prevented families increasing their debt repayments or savings.” Louise Colley, head of protection sales and marketing, Aviva The Aviva Family Finances Report 6
  7. 7. Family wealthDespite increased outgoings, it is encouraging to see that the typical family’s savings are at their highest point – £1,277 –since the Family Finances Report series launched in January 2011. This is a marked improvement on the £967 which theaverage family had saved in November 2011 and suggests that after median savings sank to £928 in January 2012, peoplehave been making a concerted effort to increase their savings pots.The biggest gains in family wealth since January 2011 have been made by those in committed relationships with plans to havechildren, where average savings have grown by £1,180 to £2,698 in January 2013.Having a larger family predictably impacts on savings levels: across all tracked family types, the average one-child familytypically has £974 put away in January 2013, compared with just £436 for families with four children. Since January 2011,those in committed relationships with one child have seen their average savings pots fall; but the gains made by those withmore than one child suggest financial planning becomes easier as people grow more accustomed to parenting.Typical (median) savings pots over the last two years £1,499 £2,096 £1,518 £2,698 £1,237 £1,031 £597 £1,180 -£206 Living with partner and don’t plan to have children Living with partner and plan to have children Living with partner with one child £815 £1,445 £199 £57 £0 £0 £630 -£142 £0 Living with partner with two or more children Divorced/separated/widowed and Single and raising one or more children alone raising one or more children alone Jan 2011 Jan 2013 ChangeMonthly savings pictureJanuary 2013 sees UK families registering their highest level of monthly savings (£80) since the Family Finances Report series beganin January 2011. This is mirrored across all family types, with the largest monthly savings (£88) made by couples planning children,and the lowest (£54) made by divorced, separated or widowed parents. Looking at different family sizes, saving patterns arerelatively uniform as families with one, two, three and four children each save between £79 and £83 in a typical month.Monthly savings habits by family type in January 2013 £80 £88 £80 £69 £54 £60 Living with partner Living with partner Living with partner Living with partner with Divorced/separated/ Single and raising and don’t plan to and plan to have with one child two or more children widowed and one or more children have children children raising one or more alone children alone The Aviva Family Finances Report 7
  8. 8. A further sign of improved savings habits comes from the falling percentage of families putting no savings asidefrom month to month. This represented 39% of families in November 2011 and 37% in August 2012, but hasnow fallen to just 34% (January 2013).Single parents (53%) and those who are divorced, widowed or separated (45%) are the most likely to savenothing in a typical month, along with families who have at least four children (40%). Those in committedrelationships with plans to have children remain the most likely to save each month (73%).Savings productsAfter basic bank or building society savings accounts (79%), ISAs are the most popular savings vehicle inJanuary 2013 for UK families (35%) followed by employer pensions (32%). The uptake of premium bondshas remained stable at 17% since August 2012; use of fixed-term bonds has grown slightly from 6% to 7%;while the number of families investing in stocks and shares has also increased from 11% to 13%.Having no children and no plans to do so in the future, means these families in January 2013 are the mostlikely to channel their savings into an ISA (44%), private pension (25%), premium bonds (21%) or fixed termbonds (9%), and stocks and shares (16%).Committed couples who plan to have children are the least likely to have premium bonds (10%), privatepensions (8%) or fixed-term bonds (5%) as they look to ensure their savings pots are readily accessible.Percentage of families with saving products 44% 34% 34% 36% 27% 18% 9% 5% 7% 7% 7% 6% 21% 10% 15% 20% 13% 11% 16% 9% 11% 14% 12% 4% 25% 8% 15% 21% 17% 12% 34% 30% 29% 38% 22% 14% Living with partner Living with partner Living with partner Living with partner with Divorced/separated/ Single and raising and don’t plan to and plan to have with one child two or more children widowed and one or more children have children children raising one or more alone children alone ISA Fixed-term bonds Premium bonds Stocks and shares Private pensions Employer pensions The Aviva Family Finances Report 8
  9. 9. “Making regular savings is fundamental to achieving financial stability and guarding against unexpected expenses or life events. Current savings patterns give plenty of cause for optimism, and while families with children understandably have less capital to put towards savings products, it is important to consider how pensions and other savings products can add a valuable resource for both parents and children in later life.” Louise Colley, head of protection sales and marketing, AvivaPlaying it safeUptake of protection products has remained relatively stable over the last twelve months – suggesting that, while savings areincreasing, families are also mindful that a further safety net could make all the difference should unforeseen circumstances ariseand are striving to avoid cutbacks to formal protection plans.Those in committed relationships with two or more children are the most likely to have life insurance in place, with almost half(46%) protected by an existing policy. They are also the most common holders of private health insurance (14%), and – in commonwith those in committed relationships with a single child – are the most likely to have income protection in place (both 9%).It is reassuring to see that having children increases the likelihood of families taking out protection products. However, as thegraphic below demonstrates, the financial pressures of supporting a large family mean that those with one child are more likely totake out each of the main protection products than those with four children.How protection levels differ by family size It also seems that parents raising children alone have made efforts to increase their level of personal protection since January 26% 11% 5% 2012. Among divorced/separated/widowed parents, uptake 8% of life insurance has grown from 28% to 33%; private health insurance from 6% to 8%; and critical illness cover from 11% to Families without children 13%. The number of single parents with private health insurance is up from 4% to 6%, while critical illness cover has increased from 2% to 8% and income protection from 2% to 4%. 41% 12% 8% 13% Families with one child 30% 9% 6% 10% Families with four children Life Insurance Private Health Insurance Critical illness cover Income Protection, for example, accident / sickness / unemployment cover The Aviva Family Finances Report 9
  10. 10. Housing wealthHomeownership by UK families – either outright or with a mortgage – fell from 61% (August 2012) to59% (January 2013), having stood at 64% in November 2011. The biggest year-on-year falls have beenexperienced in committed relationships, whether they have no plans for children (down from 73% to 61%in January 2013), plan to have children (down from 58% to 43%) or already have one child (down from69% to 54%).In contrast, the increasing trend towards renting means 25% of families are now in private rentedaccommodation, compared with 19% in November 2011: a significant rise. The biggest rise has been amongcommitted couples who plan to have children with 12% more currently renting (45% in January 2013compared with 33% in November 2011).Among families with children, committed couples with one child (27% – January 2013 vs. 19% – November2011) and single parents raising one or more children alone (38% up from 29% in November 2011) havealso seen a significant shift towards rented accommodation.Growth of renting among UK families 45% 33% 27% 27% 19% 18% Couples without plans to have children Couples with plans to have children Couples with one child 38% 29% 23% 21% 15% 11% Couples with two or more children Divorced/separated/widowed Single, raising one or more children with one or more children Jan 2013 Nov 2011Other notable changes since November 2011 include the increasing use of social housing, such as councilhousing, both by couples with one child (up from 11% to 15% in January 2013) and couples with no plansto raise a family (up from 6% to 9%). However, fewer single parents are using social housing (down from39% to 32%) – potentially linked to the current supply shortage.Additionally, an increasing number of couples who plan to have children are living with their parents – up from2% to 6% between November 2011 and January 2013. The likelihood is that the cost of climbing onto theproperty ladder is prompting more people to take this temporary measure in order to help save for their future. The value of the typical family home is £220,603 in January 2013, which is virtually unchanged from January2012 (£220,229) and compares with the average of £161,605 across the whole of the UK population.Among the tracked family types, those raising more than one child in a committed relationship have the mostvaluable properties on average (£243,491), while property values exceed £250,000 among families across allcategories with three or four children. The Aviva Family Finances Report 10
  11. 11. The typical mortgage among families, for those that have them, has also risen to £107,820 and is againthe highest figure recorded by this report series. This represents a 13% rise since November 2011,when the typical mortgage was £95,466, indicating a spate of home moving, buying or remortgaging.Single parents raising children alone have the largest mortgages on average at £127,679.Average mortgage size by family type in January 2013 £118,608 £127,679 £102,561 £109,358 £106,190 £101,894 Couples without plans Couples with plans to Couples with Couples with two Divorced/separated/ Single, raising one to have children have children one child or more children widowed with one or or more children more childrenTaking all homeowners into consideration, the mean equity tied up in their properties has recoveredto £136,416 (January 2013), after falling from £141,889 in January 2012 to £127,424 in August. “Families have experienced the highs and lows of the UK’s turbulent property market in recent years, and the renewed caution of mortgage lenders is limiting the options of first-time buyers looking to establish a family home of their own.” Louise Colley, head of protection sales and marketing, AvivaSecond homesMore than one in five (21%) families now counts a second property alongside their main residence, whetherit is a buy-to-let investment, holiday home or time-share property. The average value of a buy-to-let propertyis £200,313, up from £185,824 since August 2012, with an average outstanding mortgage of £148,902. The Aviva Family Finances Report 11
  12. 12. Family borrowingThe typical UK family owes £11,101 in unsecured lending in January 2013, which has grown from £10,563in August 2012 and is the largest amount of family borrowing recorded by the Family Finances Report.Credit cards continue to be the most popular form of borrowing (39%), followed by overdrafts (26%) andpersonal loans (22%).However, the number of families with these types of credit has fallen, indicating that debt is increasinglyconcentrated, and while typical borrowing on credit cards has risen by 17% since August 2012, overdraftshave been scaled back by 10%.Most common borrowing methods in January 2013 compared with August 2012 39% 22% 26% £6,055 £8,591 £3,955 +£921 +£36 -£428 Credit Card Personal Loans Overdraft Percentage of families Typical amount owed by those who use this type of credit Difference in comparision to August 2012Credit cards are most common among widowed/divorced/separated parents (44%), while single parents arethe family group most likely to have an overdraft (34%), personal loan (28%), storecards (19%) or use hirepurchase (12%).Less formal lendingSingle parents also make the most use of pay-day loans (14%) and pawnbrokers (9%), and it appears theiruse is on the rise, as only 8% of single parents were turning to these methods in August 2012. This suggeststhese families have found their finances especially squeezed, but overall, the use of pawnbrokers and pay-dayloans has remained static at 4% and 6% respectively among all families.In terms of borrowing from family members, 21% of single parents and committed couples with family plansmake use of this, compared with 15% of all families. The general reliance on family as a source of borrowingis at the same level as it was in August 2012 at 15%.Monthly repaymentsDespite levels of unsecured debt among UK families reaching their highest point since the Family FinancesReport launched in January 2011, monthly debt repayment has fallen to £123 (January 2013) compared with£141 in August 2012. The largest cutbacks have been by divorced, separated or widowed parents (-£29),committed couples with one child (-£25) and committed couples with no plans to have children (-£20).However, despite debt levels growing and repayments shrinking, families’ concerns about their ability to keepup with debt repayments over the next six months have actually fallen slightly from 12% in August 2012 to11% in January 2013. This suggests lower debt repayments may be a temporary measure as people adjusttheir outgoings to allow for extra expenses such as end-of-year festivities and seasonal family engagements. The Aviva Family Finances Report 12
  13. 13. A look to the futureThe increasing cost of basic necessities (56%), the threat of job losses (45%) and unplanned expenses (43%)continue to appear as the most common short-term financial fears among UK families. Yet compared withAugust 2012, fears around living costs (previously a concern for 58%) and job security (47%) are actuallytroubling fewer families.In fact, the majority of financial fears have either remained stable or fallen since the last report, with only theimpact of lower savings rates registering an increase (from 5% in August 2012 to 6% in January 2013).Compared with November 2011, only four concerns – unexpected expenses, relationship breakdown,serious illness and continued unemployment – have grown, and each by 2% or less. This suggests familiesare encouraged by the future financial outlook or have at least become accustomed to living within currentconstraints.Loss or changes to Government benefits understandably registers in the top three concerns for single parents(36%), alongside living costs and redundancy. The cost of basic necessities causes the most worry for thosein committed relationships with more than one child (59%) and registers as the single biggest worry forevery type of family – regardless of their plans to have children, relationship status or how many childrenthey have already.Top five financial fears 61% 45% 42% 21% 17% 56% 45% 43% 20% 18% Nov 2011 Jan 2013 Significant increase in the price of the basic necessities for living (e.g. food or utilities) Losing my / our jobs (i.e. redundancy) Unexpected expenses (e.g. major repairs to home) Loss / changes to current Government benefits Serious illness (for me or my partner or children)Recent announcements over the Government’s Funding for Lending Scheme and discussions arounda further decrease to the base rate has calmed some families’ fears, and just 13% are worried abouthigher mortgage rates (14% – Aug 2011). Couples in a committed relationship with more than onechild (16%) are most worried about an increase in mortgage rates. The Aviva Family Finances Report 13
  14. 14. Spotlight: the challenges facinga modern young familyIn 2011 723,913 children were born, 18% more than a decade ago (2001 – 594,634). This suggests there are asignificant and increasing number of “young families” (at least one child younger than four years old) in the UK.Given the uncertain economic climate and recent instability in the financial and property markets, these families facea range of financial challenges that may be less familiar to older parents and their offspring – both at work, at homeand in their leisure time.Home ownershipOverall, 59% of families are homeowners by the time their first child is born. Following the credit crunch whichstarted in August 2007, homeownership by first-time parents has fallen noticeably. While 61% of parents withchildren aged 4 to 7 owned their own home when their first child arrived, as did 63% with children aged 8 to 10,only 52% of parents with children aged 1 to 3 were homeowners at the same stage of family life.Renting vs homeownership among UK families when their first child was born 54% 26% 66% 14% 66% 13% 29% 23% Living with partner with one child Living with partner with two or Divorced/separated/widowed and Single and raising one or more more children raising one or more children alone children alone Homeownership RentingInstead, noticeably more first-born children are spending their early years of family life in rented accommodation:26% of families with children aged 1 to 3 and 20% with children aged 4 to 7 rented when their first-bornarrived, compared with 13% or fewer families with older children. For 12% of parents with children aged 1 to 3,having a young family has meant renting for longer, compared with 7% of parents overall.Having a young family has other implications on homeownership for the modern family. One in eight (12%)of those with children aged 1 to 3 have been prompted into buying a home earlier than they would otherwisehave done, while 6% have had to borrow money from other family members in order to afford a deposit. The Aviva Family Finances Report 14 The Aviva Family Finances Report 14
  15. 15. Laying the foundations for a young familyWhen it comes to financial planning for family life, considerably more activity takes place as a result ofchildbirth, rather than in advance. The most common preparation for having a young family is moving home(17% of all parents), while 12% begin saving for a rainy day and 9% take out life insurance.After they are born, almost half of parents (47%) start a savings account for their child or children, while34% of parents move house, 21% make a will and 20% take out life insurance. Comparing differentgenerations, parents with children over 21 were significantly more likely to have made a will after having ayoung family (28%) than more recent parents with children aged 1 to 3 (16%).Actions taken in preparation for or as a result of having a young family While we were As a result of having a planning a family young family I moved house 17% 34% I changed job 7% 21% I started a private / employer pension and started paying into it 5% 8% I made a will 5% 21% I took out life insurance 9% 20% I took out critical illness cover 5% 10% I started a savings account for my children 5% 47% I saved for a rainy day 12% 20% I invested into financial products such as bonds or shares 3% 7% I or my partner gave up work 4% 29% I or my partner reduced our working hours 3% 26%Juggling work and family lifeRaising a ‘modern’ family also has a significant impact on working patterns. Almost a quarter (23%) of allparents changed job as a result of having a young family, 26% reduced their working hours, while in 36% ofcases one or other partner gave up work.For those who have been prompted to change jobs to help raise a young family, by far the most commonreason was to earn a higher income (49%). Parents with younger children (aged 1 to 3) are more likely tohave changed job in order to work flexible hours (34%) or work fewer hours (31%) to help with childcare,compared with parents whose children are now aged 11 or above (both 29%).This is potentially a sign that more companies are prepared to offer flexible working arrangements to helpaccommodate childcare. It is backed up by the fact that fewer parents with children aged 1 to 3 are giving upwork entirely to support their young families (28%), compared with parents whose children are now aged 11or older (30%) and whose experience of raising a young family dates back to the early 2000s or before. The Aviva Family Finances Report 15 The Aviva Family Finances Report 15
  16. 16. Balancing the family booksFinancial priorities change dramatically with a young family, and four in five families (81%) have had to moderate their spendingon a range of leisure activities or make short-term adjustments in one form or other, such as dipping into savings (25%), stoppingsaving (23%) or stopping paying into a pension (6%).The most common cost-cutting measures are to take fewer holidays or weekends away (52%), eat out or get takeaways less often(51%) or cut back on going out for entertainment and recreation purposes (48%), for example to pubs, concerts and the cinema.Most common cost-cutting methods across all young families 17% Gave up membership 51% of a gym or Ate out or got 52% sports club take-aways less often Took fewer holidays / weekends away 29% Took shorter holidays / holidays in the UK 25% 23% Stopped saving Gave up personal 31% goods and services Did food shopping in a (e.g. make-up, cheaper supermarket 48% manicures) Went out for entertainment and recreation less often 6% (e.g. bars/nightclubs/gigs/cinema) 11% Stopped paying into a pension Cancelled a satellite TV subscription 35% Did clothes shopping from cheaper retailers The Aviva Family Finances Report 16
  17. 17. The added financial pressures of raising a young family are evident in the fact that 44% of parents worryabout their income and finances – and the extent of these fears seems to be more prevalent among youngfamilies. Among parents whose children are now aged 16 to 21, only 33% said having a young family causedthem these concerns, compared with 56% of parents with children currently aged under two years.Up to 32% of families say that raising young children has increased their level of household personal debt,for example through additional credit card spending or loans. For 18%, this is a temporary increase but theremaining 14% say their increased debt has been permanent. A similar number – 15% – have been driven toborrow money from family, while financial stresses and strains have caused arguments between partners orfamily members for nearly one in five (18%) of families.Unsurprisingly, the likelihood of personal debt rising and family arguments occurring as a result of raising ayoung family increases with family size – but only marginally. Eighteen per cent of parents with one child foundtheir debt increasing temporarily, compared with 21% of parents with four children. The comparison in termsof permanently increased debt is 14% vs 17%; where family arguments are concerned, it is 18% vs 22%.Pressure from all sidesModern young families can come under considerable pressure to spend beyond their means, both from insideand outside the family unit. It is perhaps inevitable that children are responsible for this in 37% of families,while 12% of parents experience pressure from a partner, 10% from schools, 7% from their children’sfriends and 6% from the media, as well as 6% from other parents.The findings highlight the challenges facing modern lone parents, as pressure from their children impacts 53% ofsingle parents and 47% of divorced, widowed or separated parents. And as family size increases, across all familytypes, so does the level of pressure. More four-child families (47%) feel coerced to spend by their children thanone-child families (37%); by their children’s friends (13% of four-child families compared with 8% of one-childfamilies); and by schools (16% of four-child families compared with 10% of one-child families). The Aviva Family Finances Report 17 The Aviva Family Finances Report 17
  18. 18. Drawing the line on family planningHaving experienced the financial pressures of raising a young family, modern parents have importantdecisions to make in terms of their future plans. Financial constraints have stopped 45% of parents fromhaving more children, and while 71% of these are happy with their family size, the remaining 29% have hadto compromise on their idea of a larger family.Overall, 16% of parents have decided not to have larger families so they can give their existing children thebest they can afford. Where state support is concerned, parents are divided on their opinion about how ChildBenefits should be targeted. Almost one in five (18%) would back Government moves to restrict Child Benefitsto the first two children only, while the same number feel the proposed reforms are yet to get it right.There is a clear generational split in attitudes towards the universal right to Child Benefit. Across all parentalgroups, 12% feel it should be available for everyone with children, and paid per child. This includes 14% ofparents who are currently raising young families aged 1 to 3, but only 5% of parents with adult children aged21 or above back this idea. Although they may not stand to be affected by this change, this is an interestingjudgement given their greater experience of the financial pressures that come with raising a young family.Looking to the future: more pressure, more expect to help adult childrenModern parents of young families clearly feel they have to deal with a greater level of financial pressure thantheir own parents. Almost half (41%) of parents subscribe to this view, increasing to 47% among single,divorced, separated or widowed parents. Only 16% of parents overall feel they experience less pressure thantheir parents did before them.It is also telling that, when asked about a range of significant costs that may be encountered duringparenthood, there is a greater expectation among modern parents that they will be called upon to help theirchildren, compared with the help they received during their own upbringing.Financial help received by and expected from modern parents 38% 41% 28% 41% 11% 28% 7% 17% 26% 39% 15% 25% 11% 21% +3% +13% +17% +10% +13% +10% +10% Staying in education Going onto further or Pursuing a career (for Travelling or Learning to drive Buying a first Starting a family to do A-levels (for higher education at example, through taking a gap year home example, at school or college or university work experience or sixth-form college) internships) Parents who had help from their own parents Parents who expect to help their children Difference between the two The Aviva Family Finances Report 18 The Aviva Family Finances Report 18
  19. 19. The children of modern young families face a very different future to their parents, with average annualuniversity tuition fees now more than £8,500 for 2013/14 following the tuition fees reform in 2010, and 17%of England’s 16 to 24 year olds not in education, employment or training (‘NEETs’) in the third quarter of 2012.For these reasons, the areas where financial expectations have increased the most for modern parents centreon their children’s education and employment prospects. These also feature among the issues of greatestconcern for modern parents: 33% worry about their ability to help their children with higher education costs,23% are concerned about supporting them during their A-levels, and 22% worry about providing financialhelp for their children to pursue a career.With the average deposit for first-time buyers in the UK reaching £27,375 in October 2012, almost a third ofparents (29%) are also worried by their capacity to help their children onto the property ladder in later life. “Parents with young families find themselves faced with many financial challenges and pressures that are less familiar to older generations. Flexible employment means they may be able to keep working, but when it comes to buying their first home this is likely to be much harder. With children anticipated to become more dependent on family support to boost their employment and education prospects, it is even more important for today’s parents to ensure their incomes are protected and to explore how best to save and invest for their family’s future.” Louise Colley, head of protection sales and marketing, Aviva The Aviva Family Finances Report 19 The Aviva Family Finances Report 19
  20. 20. The view across the UKSummaryWhile families in London (£2,231) and the South East (£2,211) continue to have the highest incomesacross the UK, they have fallen since January 2012, when incomes in London and the South East reached£2,845 and £2,314 respectively.Families with the lowest incomes in the UK are located in the North East, Wales and Scotland whereaverage monthly incomes currently stand at £1,646, £1,718 and £1,891.Assets and savingsFamilies in the capital also tend to have the most held in savings and investments (£4,537), followed by theSouth East (£2,544) and South West (£1,691). In the capital, 73% of families are also committed to savinga proportion of their household income each month. By contrast families in the North East and Wales haveconsiderably less put away, with only £249 and £398 respectively. Across the North East, 39% of familiessave nothing each month, with this number increasing to 42% of those in Wales.BorrowingCredit card borrowing is most prevalent in Wales, where 47% of families have credit card debt – with theaverage amount owed £8,276. This is followed by Northern Ireland and the North West, where 45% and43% of families have credit card debt. In contrast, in Scotland only 32% of households owe money oncredit cards.This suggests there is not necessarily a correlation between areas of lower household incomes and levels ofcredit card borrowing. Instead some areas of the UK seem to have different approaches to managing theirhousehold budgets than others.HousingIn London, prices have continued to rise, with the average family home now valued at £371,081. Thisrepresents a significant gap when compared to the rest of the UK, as the national average currentlystands at £220,603. Outside of London, the UK’s most expensive homes can be found in the South East(£271,341). By comparison, houses in the North East are significantly less expensive, with the averagefamily home now valued at £159,856.London also leads the way in terms of the number of families in private rental accommodation (31%),followed by the North West and Wales (both 29%). Renting is least common in Scotland (17%) and theEast (17%), although Scotland also has the highest proportion of families in social housing (23%).Long-term financial securityAlthough family households in London evidently have the largest monthly incomes and most valuablehomes, this comes at a price. Only 28% of Londoners have started paying into a pension plan, 26% havetaken out life insurance and a further 28% have taken no steps at all to prepare for the future.In the North of England, people generally appear to be more cautious about their long term financialprospects. In the North West in particular, 36% of people have started paying into a pension plan, whilst35% of families have taken out life insurance. The Aviva Family Finances Report 20
  21. 21. Average monthly income Average total savings Average monthly savings Credit card borrowing Average house value Scotland £2,043 UK £43 £1,277 £1,891 £210,620 £1,181 £72 £1,966 £1,646 £1,136 £168,994 £249 £56 N. Ireland £1,803 £159,856 £1,899 £1,511 N. West N. East£1,499 £0 £166,875 £1,923 £962 £1,920 £64 £1,082 £63 £189,564 £2,169 £1,611 £175,098 Yorkshire E. Midlands £2,020 £1,443 £56 £1,988 £1,131 £179,706 £771 £64 £2,078 £187,758 £1,718 £3,608 £998 £43 £398 £42 £239,118 W. Midlands £1,966 £170,122 £8,276 East S. West Wales £2,211 London £2,109 £2,544 £79 £1,691 £69 £271,341 £224,650 £2,773 S. East £2,073 £2,231 £4,537 £86 £371,081 £1,981 The Aviva Family Finances Report 21
  22. 22. So what does this tell us?“This edition of the Aviva Family Finances Report suggests that while incomeshave risen among UK families, their monthly outgoings have been affected byincreasing costs of living, as well as the need to make greater debt repaymentsin line with increased borrowing.It’s great that families are making efforts to increase their savings pots, andthat the responsibility of raising children makes them more likely to take outprotection products. When more families are living in rented accommodation,it can leave them especially vulnerable to unexpected changes in theircircumstances, so the added security of financial protection can prove to be ofenormous value.The report also looks at the challenges facing a modern young family, with18% more children born in the UK in 2011 compared with 2001. Financialpressures mean that increasing numbers of new parents are bringingtheir children up in rented accommodation, and changing their workingarrangements to support their families.With the bulk of financial decisions taking place after the arrival of a youngfamily, modern parents are experiencing a growing level of concern abouttheir income and finances, and sacrificing spending on non-essential goodsand services. In many cases, financial constraints have limited the number ofchildren families are having.What is clear is that today’s parents of young families feel a level of expectationto support their children that did not exist for their own parents. With a child’seducation and employment prospects often boosted by parental supportin later life, it is vitally important for families to ensure they have financialprotection in place to safeguard their futures.Individual parents may have little power, forexample, over the UK housing and mortgagemarket or the rising cost of higher education;but any steps they can take to protecttheir finances could make all the differencein helping their children to grasp theopportunities they aspire to in years to come.”Louise Colley, head of protectionsales and marketing, Aviva The Aviva Family Finances Report 22
  23. 23. MethodologyThe Aviva Family Finances Report was designed and produced by Wriglesworth Research. Over 2,000 people aged18-55 who live as part of one of six family groups were interviewed by Opinion Matters in order to produce thereport’s latest findings.In total, 16,222 UK consumers have been interviewed between January 2011 and January 2013. This data wascombined with additional information from the sources listed below and used to form the basis of the Aviva FamilyFinances Report. All statistics refer to figures released in January 2013 unless stated otherwise.Additional data sources include:l Department for Education (DfE) – NEET Statistics – Quarterly Brief – Quarter 3 2012, November 2012l First Time Buyers, Lending and Affordability – October 2012 – Council of Mortgage Lenders (CML)l Land Registry – House Price Index – October 2012l Office for Fair Access (OFFA) – OFFA publication 2012/07 – 2013-14 access agreements, institutional expenditure and fee levelsl Office of National Statistics (ONS) – Inflation Figures – June 2012l Passenger Focus – Individual Fare Increases – 6 December 2012Technical notesl A median is described as the numeric value separating the upper half of a sample, a population, or a probability distribution, from the lower half. Thus for this report, the median is the person who is the utter middle of a sample.l An average or mean is a single value that is meant to typify a list of values. This is derived by adding all the values on a list together and then dividing by the number of items on said list. This can be skewed by particularly high or low values.For further information on the report or for a comment, please contact Sarah Poulter at the Aviva Press Office on01904 452828 or sarah.poulter@aviva.co.uk The Aviva Family Finances Report 23
  24. 24. GN 20 644 01/2013 © Aviva plc

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