Widening void between the ‘haves’ and ‘have nots’
Rising incomes and savings pots among UK families are masking a widening gap between the ‘haves’ and ‘have nots’, the latest Aviva Family Finance Report reveals. The last six months have seen the typical family’s income reach its highest point since March 2012. Better savings habits also mean the typical family is saving a record £113 each month.
But, despite these improvements, the income gap between family types has widened, and many families are not managing to save each month, leaving them vulnerable to financial shocks – particularly as debts have also increased.
Parents raising children alone are left behind by income gains
The typical family’s monthly income after tax reached a three-year high of £2,126 in May, the highest figure recorded since March 2012 (£2,139).
However, the upward trend masks a widening gap between the ‘haves’ and the ‘have nots’. Couples with plans to have children have made the greatest gains since November 2014 and have seen their monthly incomes rise by £339, from £2,122 to £2,461. This is more than twice the boost enjoyed by any other family types.
In contrast, parents who are raising children alone – either as single parents or as a result of being divorced, separated or widowed – have seen their monthly incomes drop from £1,176 to £1,077 over the same period. This loss of £99 a month adds up to £1,188 annually, the equivalent of one month’s salary.
This group has also seen the gap widen between their income and that of the typical family from £866 to £1,049 over the last six months.
The data shows while the proportion of families taking home at least £2,500 a month has risen from 39% to 43% in the last six months, the percentage taking home £1,000 or less has stayed consistent at 10%. This means at least one in ten families are still surviving on less than half of the typical family’s income.
Savers act to grow their pots – but many families aren’t putting money away
Savings trends also highlight the differing fortunes of UK families. Rising incomes mean the typical family is saving more and putting aside a record £113 a month, compared with £99 in November 2014. The typical savings pot is now £3,116.
However, more than a quarter of families (26%) are saving nothing each month, and the percentage with no savings cushion has remained static at 17% over the last six months.
It suggests that, while those families who can afford to save are making efforts to put more money away, the situation has shown little sign of improving for those who were already struggling or failing to do so.
The typical family has used its income gains to increase monthly debt repayments over the last six months, from £197 in November to £225. But the average balance owed has also risen by 5% from £9,050 to £9,520, suggesting that some families are relying more heavily on borrowing to supplement their incomes. ν
The Family Finances Report is designed and produced by Aviva in consultation with ICM Research. The report is an in-depth study into the financial needs of the 84% of the UK population who live as part of a modern family. Based on customer profiles and Government data, Aviva has recognised the six most common types of modern family as:
Living in a committed relationship with no plans to have children
Living in a committed relationship with plans to have children
Living in a committed relationship with one child
Living in a committed relationship with two or more children
Divorced/separated/widowed with one or
Single parent raising one or more child alone
Unless otherwise specified, data was sourced from the Aviva Family Index, which used findings from over 26,000 people who are members of one of the six groups of families identified above via ICM research.