The Aviva Family Finances report - January 2013

The Aviva Family
Finances Report
January – 2013

The typical UK family
The diversity of modern society means there is no single
model of the ‘traditional family’ in the UK. Instead,
with 84% of the population living as part of a modern
family group, their social and economic experiences are
influenced by a range of variables which shape their
attitudes towards family, work and financial planning.

The Aviva Family Finances Report looks at the contrasting experiences of different family
types (see page three for groups tracked). 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?

All of these questions and the resulting answers paint a picture of a modern family striving
to 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

The modern UK family
Thirty years ago, the typical UK family was referred to as
the ‘nuclear family’ and consisted of 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 of modern family based
on 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.


Income
The typical monthly net income among UK families rose slightly in the last quarter to £2,043, up by £40 (2%) from August 2012
and by £60 (3%) compared with November 2011. The highest earning families continue to be those in committed relationships
with 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 alone

Looking at families with children, those with two children have the largest typical monthly incomes of £2,016, followed
by one-child families on £1,989 and £1,818 for three-child families. The fact that four-child families are typically surviving
on the lowest monthly net incomes – £1,600 – suggests they will be particularly pressured financially unless their number
includes 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 surviving
on less than £1,250 (22%) or earning more than £2,500 (31%) remaining stable. However, compared with November
2011, when 30% earned less than £1,250 while 36% took home more than £2,500, the situation seems more positive
for lower earners in terms of income growth.

Income sources
The number of UK parents drawing income from a primary breadwinner’s main job has fallen slightly from 72% (August
2012) to 70% (January 2013). However, the number of families drawing on a spouse’s primary job has increased from
32% (November 2011) to 34% (January 2013) suggesting a slight growth in the number of families with two working
parents. Secondary or part-time work remains an income generator for 18% of families, as it was back in January 2011.

Other sources of income
Benefits 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 includes
26% 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 has
shrunk from 41% to 34%, with some welfare cuts having taken effect. In contrast, around half of single parents with sole
responsibility 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 August
2012. The impact of raising children on the typical family’s ability to save and invest means those without children are
more likely to draw an income from this source (9%) than those with (6%).


Expenditure
For the fourth consecutive quarter, typical monthly expenditure by UK families grew, with current typical outgoings
of £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 over
the last twelve months. With the average price of rail fares increasing by 5.9% in January 2012, combined
with 4.96% inflation, expenditure on day-to-day travel has grown more than any other cost since November
2011, with the typical UK family spending £341 more every year to meet this need. A further average price
rise 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 food
shopping are rising. Inflation of 3.13% means the typical family now spends £234 more on annual food bills
than 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.


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 on
non-essential spending. Changing priorities have impacted the number of families who spend on a range
of non-essential items each month, while the figures also suggest that a significant number of parents are
sacrificing 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


Family wealth
Despite 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 the
average family had saved in November 2011 and suggests that after median savings sank to £928 in January 2012, people
have 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 have
children, 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 family
typically 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 with
more 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 Change

Monthly savings picture
January 2013 sees UK families registering their highest level of monthly savings (£80) since the Family Finances Report series began
in 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 are
relatively 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

children alone


A further sign of improved savings habits comes from the falling percentage of families putting no savings aside
from month to month. This represented 39% of families in November 2011 and 37% in August 2012, but has
now fallen to just 34% (January 2013).

Single parents (53%) and those who are divorced, widowed or separated (45%) are the most likely to save
nothing in a typical month, along with families who have at least four children (40%). Those in committed
relationships with plans to have children remain the most likely to save each month (73%).

Savings products
After basic bank or building society savings accounts (79%), ISAs are the most popular savings vehicle in
January 2013 for UK families (35%) followed by employer pensions (32%). The uptake of premium bonds
has 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 most
likely to channel their savings into an ISA (44%), private pension (25%), premium bonds (21%) or fixed term
bonds (9%), and stocks and shares (16%).

Committed couples who plan to have children are the least likely to have premium bonds (10%), private
pensions (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%

children alone

ISA Fixed-term bonds Premium bonds Stocks and shares Private pensions Employer pensions


“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.”

Playing it safe
Uptake of protection products has remained relatively stable over the last twelve months – suggesting that, while savings are
increasing, families are also mindful that a further safety net could make all the difference should unforeseen circumstances arise
and 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 common
with 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 the
graphic below demonstrates, the financial pressures of supporting a large family mean that those with one child are more likely to
take 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


Housing wealth
Homeownership by UK families – either outright or with a mortgage – fell from 61% (August 2012) to
59% (January 2013), having stood at 64% in November 2011. The biggest year-on-year falls have been
experienced 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 from
69% to 54%).

In contrast, the increasing trend towards renting means 25% of families are now in private rented
accommodation, compared with 19% in November 2011: a significant rise. The biggest rise has been among
committed couples who plan to have children with 12% more currently renting (45% in January 2013
compared with 33% in November 2011).

Among families with children, committed couples with one child (27% – January 2013 vs. 19% – November
2011) and single parents raising one or more children alone (38% up from 29% in November 2011) have
also 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 2011

Other notable changes since November 2011 include the increasing use of social housing, such as council
housing, both by couples with one child (up from 11% to 15% in January 2013) and couples with no plans
to raise a family (up from 6% to 9%). However, fewer single parents are using social housing (down from
39% 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 from
2% to 6% between November 2011 and January 2013. The likelihood is that the cost of climbing onto the
property 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 January
2012 (£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 most
valuable properties on average (£243,491), while property values exceed £250,000 among families across all
categories with three or four children.


The typical mortgage among families, for those that have them, has also risen to £107,820 and is again
the 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 children

Taking all homeowners into consideration, the mean equity tied up in their properties has recovered
to £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.”

Second homes
More than one in five (21%) families now counts a second property alongside their main residence, whether
it is a buy-to-let investment, holiday home or time-share property. The average value of a buy-to-let property
is £200,313, up from £185,824 since August 2012, with an average outstanding mortgage of £148,902.


Family borrowing
The typical UK family owes £11,101 in unsecured lending in January 2013, which has grown from £10,563
in 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%) and
personal loans (22%).

However, the number of families with these types of credit has fallen, indicating that debt is increasingly
concentrated, and while typical borrowing on credit cards has risen by 17% since August 2012, overdrafts
have 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 2012

Credit cards are most common among widowed/divorced/separated parents (44%), while single parents are
the family group most likely to have an overdraft (34%), personal loan (28%), storecards (19%) or use hire
purchase (12%).

Less formal lending
Single parents also make the most use of pay-day loans (14%) and pawnbrokers (9%), and it appears their
use is on the rise, as only 8% of single parents were turning to these methods in August 2012. This suggests
these families have found their finances especially squeezed, but overall, the use of pawnbrokers and pay-day
loans 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 plans
make use of this, compared with 15% of all families. The general reliance on family as a source of borrowing
is at the same level as it was in August 2012 at 15%.

Monthly repayments
Despite levels of unsecured debt among UK families reaching their highest point since the Family Finances
Report 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 keep
up with debt repayments over the next six months have actually fallen slightly from 12% in August 2012 to
11% in January 2013. This suggests lower debt repayments may be a temporary measure as people adjust
their outgoings to allow for extra expenses such as end-of-year festivities and seasonal family engagements.


A look to the future
The 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 with
August 2012, fears around living costs (previously a concern for 58%) and job security (47%) are actually
troubling fewer families.

In fact, the majority of financial fears have either remained stable or fallen since the last report, with only the
impact 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 families
are encouraged by the future financial outlook or have at least become accustomed to living within current
constraints.

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 those
in committed relationships with more than one child (59%) and registers as the single biggest worry for
every type of family – regardless of their plans to have children, relationship status or how many children
they 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 around
a further decrease to the base rate has calmed some families’ fears, and just 13% are worried about
higher mortgage rates (14% – Aug 2011). Couples in a committed relationship with more than one
child (16%) are most worried about an increase in mortgage rates.


Spotlight: the challenges facing
a modern young family
In 2011 723,913 children were born, 18% more than a decade ago (2001 – 594,634). This suggests there are a
significant 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 face
a range of financial challenges that may be less familiar to older parents and their offspring – both at work, at home
and in their leisure time.

Home ownership
Overall, 59% of families are homeowners by the time their first child is born. Following the credit crunch which
started in August 2007, homeownership by first-time parents has fallen noticeably. While 61% of parents with
children 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 Renting

Instead, 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-born
arrived, 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 otherwise
have done, while 6% have had to borrow money from other family members in order to afford a deposit.


Laying the foundations for a young family
When it comes to financial planning for family life, considerably more activity takes place as a result of
childbirth, 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, while
34% of parents move house, 21% make a will and 20% take out life insurance. Comparing different
generations, parents with children over 21 were significantly more likely to have made a will after having a
young 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 life
Raising a ‘modern’ family also has a significant impact on working patterns. Almost a quarter (23%) of all
parents changed job as a result of having a young family, 26% reduced their working hours, while in 36% of
cases 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 common
reason was to earn a higher income (49%). Parents with younger children (aged 1 to 3) are more likely to
have 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 help
accommodate childcare. It is backed up by the fact that fewer parents with children aged 1 to 3 are giving up
work entirely to support their young families (28%), compared with parents whose children are now aged 11
or older (30%) and whose experience of raising a young family dates back to the early 2000s or before.


Balancing the family books
Financial priorities change dramatically with a young family, and four in five families (81%) have had to moderate their spending
on a range of leisure activities or make short-term adjustments in one form or other, such as dipping into savings (25%), stopping
saving (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 added financial pressures of raising a young family are evident in the fact that 44% of parents worry
about their income and finances – and the extent of these fears seems to be more prevalent among young
families. Among parents whose children are now aged 16 to 21, only 33% said having a young family caused
them 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 the
remaining 14% say their increased debt has been permanent. A similar number – 15% – have been driven to
borrow money from family, while financial stresses and strains have caused arguments between partners or
family 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 a
young family increases with family size – but only marginally. Eighteen per cent of parents with one child found
their debt increasing temporarily, compared with 21% of parents with four children. The comparison in terms
of permanently increased debt is 14% vs 17%; where family arguments are concerned, it is 18% vs 22%.

Pressure from all sides
Modern young families can come under considerable pressure to spend beyond their means, both from inside
and 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’s
friends 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% of
single parents and 47% of divorced, widowed or separated parents. And as family size increases, across all family
types, so does the level of pressure. More four-child families (47%) feel coerced to spend by their children than
one-child families (37%); by their children’s friends (13% of four-child families compared with 8% of one-child
families); and by schools (16% of four-child families compared with 10% of one-child families).


Drawing the line on family planning
Having experienced the financial pressures of raising a young family, modern parents have important
decisions to make in terms of their future plans. Financial constraints have stopped 45% of parents from
having more children, and while 71% of these are happy with their family size, the remaining 29% have had
to 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 the
best they can afford. Where state support is concerned, parents are divided on their opinion about how Child
Benefits should be targeted. Almost one in five (18%) would back Government moves to restrict Child Benefits
to 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 parental
groups, 12% feel it should be available for everyone with children, and paid per child. This includes 14% of
parents who are currently raising young families aged 1 to 3, but only 5% of parents with adult children aged
21 or above back this idea. Although they may not stand to be affected by this change, this is an interesting
judgement 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 children
Modern parents of young families clearly feel they have to deal with a greater level of financial pressure than
their 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 than
their parents did before them.

It is also telling that, when asked about a range of significant costs that may be encountered during
parenthood, there is a greater expectation among modern parents that they will be called upon to help their
children, 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 children of modern young families face a very different future to their parents, with average annual
university 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 centre
on their children’s education and employment prospects. These also feature among the issues of greatest
concern 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 financial
help 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 of
parents (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.”


The view across the UK

Summary
While families in London (£2,231) and the South East (£2,211) continue to have the highest incomes
across 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 where
average monthly incomes currently stand at £1,646, £1,718 and £1,891.

Assets and savings
Families in the capital also tend to have the most held in savings and investments (£4,537), followed by the
South East (£2,544) and South West (£1,691). In the capital, 73% of families are also committed to saving
a proportion of their household income each month. By contrast families in the North East and Wales have
considerably less put away, with only £249 and £398 respectively. Across the North East, 39% of families
save nothing each month, with this number increasing to 42% of those in Wales.

Borrowing
Credit card borrowing is most prevalent in Wales, where 47% of families have credit card debt – with the
average amount owed £8,276. This is followed by Northern Ireland and the North West, where 45% and
43% of families have credit card debt. In contrast, in Scotland only 32% of households owe money on
credit cards.

This suggests there is not necessarily a correlation between areas of lower household incomes and levels of
credit card borrowing. Instead some areas of the UK seem to have different approaches to managing their
household budgets than others.

Housing
In London, prices have continued to rise, with the average family home now valued at £371,081. This
represents a significant gap when compared to the rest of the UK, as the national average currently
stands 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 average
family 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 the
East (17%), although Scotland also has the highest proportion of families in social housing (23%).

Long-term financial security
Although family households in London evidently have the largest monthly incomes and most valuable
homes, this comes at a price. Only 28% of Londoners have started paying into a pension plan, 26% have
taken 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 financial
prospects. In the North West in particular, 36% of people have started paying into a pension plan, whilst
35% of families have taken out life insurance.


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


So what does this tell us?

“This edition of the Aviva Family Finances Report suggests that while incomes
have risen among UK families, their monthly outgoings have been affected by
increasing costs of living, as well as the need to make greater debt repayments
in line with increased borrowing.

It’s great that families are making efforts to increase their savings pots, and
that the responsibility of raising children makes them more likely to take out
protection products. When more families are living in rented accommodation,
it can leave them especially vulnerable to unexpected changes in their
circumstances, so the added security of financial protection can prove to be of
enormous value.

The report also looks at the challenges facing a modern young family, with
18% more children born in the UK in 2011 compared with 2001. Financial
pressures mean that increasing numbers of new parents are bringing
their children up in rented accommodation, and changing their working
arrangements to support their families.

With the bulk of financial decisions taking place after the arrival of a young
family, modern parents are experiencing a growing level of concern about
their income and finances, and sacrificing spending on non-essential goods
and services. In many cases, financial constraints have limited the number of
children families are having.

What is clear is that today’s parents of young families feel a level of expectation
to support their children that did not exist for their own parents. With a child’s
education and employment prospects often boosted by parental support
in later life, it is vitally important for families to ensure they have financial
protection in place to safeguard their futures.

Individual parents may have little power, for
example, over the UK housing and mortgage
market or the rising cost of higher education;
but any steps they can take to protect
their finances could make all the difference
in helping their children to grasp the
opportunities they aspire to in years to come.”

Louise Colley, head of protection
sales and marketing, Aviva


Methodology
The Aviva Family Finances Report was designed and produced by Wriglesworth Research. Over 2,000 people aged
18-55 who live as part of one of six family groups were interviewed by Opinion Matters in order to produce the
report’s latest findings.

In total, 16,222 UK consumers have been interviewed between January 2011 and January 2013. This data was
combined with additional information from the sources listed below and used to form the basis of the Aviva Family
Finances 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 2012

l First Time Buyers, Lending and Affordability – October 2012 – Council of Mortgage Lenders (CML)

l Land Registry – House Price Index – October 2012

l Office for Fair Access (OFFA) – OFFA publication 2012/07 – 2013-14 access agreements, institutional expenditure
and fee levels

l Office of National Statistics (ONS) – Inflation Figures – June 2012

l Passenger Focus – Individual Fare Increases – 6 December 2012

Technical notes
l 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 on
01904 452828 or sarah.poulter@aviva.co.uk


The Aviva Family Finances report - January 2013

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