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Families walk the financial tightrope

Families walk the financial tightrope

Category: Money

Updated: 31/08/2011
First Published: 31/08/2011

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Families are walking a financial tightrope as the cost of living rises while levels of debts have increased.

While families saw annual inflation increase dramatically on essentials such as food (+6.4%) and fuel and lighting (+7.45%), monthly incomes actually fell by an average of 2% from £2,062 (May 2011) to £2,018 (August 2011).

It means that family finances are being stretched as the prices of essentials such as energy, food and fuel continue to soar.

Despite this precarious situation, the typical family in the UK has less than £1,000 (£982) stashed away in savings, having fallen significantly since May when the figure was £1,163.

It suggests that people are having to dip into their savings to pay for everyday costs.

However, it does appear that the tough economic conditions are forcing more people to evaluate their savings habits.

Since the start of the year, the number of non-savers has fallen from 40% (Jan 2011) to 37% (May 2011) to 36% (Aug 2011). The typical amount saved each month is £34 (Aug 2011) which is up slightly from May (£32).

In keeping with the increased worries around the cost of living, families are feeling increasingly financially unprotected, with just one in 20 families feeling fully protected financially and 49% feeling under / unprotected.

"Faced with rising costs and largely static salaries, UK families are more worried than ever about their finances," Louise Colley, head of protection for Aviva, said.

"However, we have seen some positive signs that people are looking to change their financial behaviour for the better.

"For example, almost half of all families now acknowledge they are under-protected, which suggests at least a growing awareness of the need to protect their families."

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