Household budgets are already squeezed by rising costs of rent, mortgage payments and utility bills, but it could get even worse – a new report has revealed that an increasing proportion of our income will be taken up by these household costs, with earnings not keeping up with expenditure.
The PwC UK Economic Outlook painted a positive picture of UK growth, but this will take its toll on our budgets. The proportion of income taken up by housing and utilities is already up from 20% to 25% since the financial crisis hit and this could rise to 30% by 2030, and some could see their bills rise by considerably more.
This is before spending on food has been taken into account, an outgoing which is also expected to increase, and with the addition of stagnant earnings growth (the report found that real earnings growth will only resume by 2015 and even then at a modest pace, with earnings in 2017 still being 6% below the peak levels of 2008) it could end up putting a huge strain on household budgets.
This all means householders need to be prepared, with industry experts urging people to get into the savings habit to prepare for the rising costs of living.
A cash ISA is a great way to get things started, allowing individuals to save up to £5,760 per tax year (the level of which will rise in the year 2014/15) completely tax-free. A stocks and shares ISA is a slightly more complex alternative, or for those willing to lock their money away for a guaranteed return a mid to long-term bond could be the solution.
Even putting away a modest amount every month could make a difference, and by 2030 householders could have a valuable nest egg that could help them prepare for increasing pressures on their budget.
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