The results from Aviva Family Finances study showed the debt problems of the nation have continued to steadily rise over the past twelve months.
The average debt that a family faces has increased to £7,944, a rise of 48%, excluding mortgages, an amount estimated to be around a third of the typical net income for a household. The debts weighing heaviest on family finances were credit cards, with an average of £2,314 owing, with personal loans and overdrafts the next two on the list.
The researchers found that income has risen by an average of 7% per family, but the report warned that this increase was not sufficient to keep pace with the rocketing costs of bills and inflation. This was demonstrated by the fact that 10% of income was being spent on food, a figure which remained unchanged, despite more and more households shopping around for cheaper deals. Housing was the single biggest expense for most of those asked, taking up an average 20% of income.
The pressure of overstretched finances has also led to far fewer families being able to afford to put money aside for a rainy day. The study found that 42% of households had no leftover cash to save, an increase of 2% on last year’s results. The amount of money available to spend on activities for the children also fell, dropping from 4% of the average monthly income in January 2011, to just 1% this year.
One in five families said they spent no money at all on personal goods, whilst close to one in three said they had no money to spend on either entertainment, recreation or holidays.
Households without children fared the best, with the largest rises in income recorded in childless families. Single parents were at the opposite end of the spectrum, with one parent families suffering the most.
Couples who were hoping to start a family enjoyed an increase of 11% in their income, with the average income rising to £2,433, whilst those with no plans to have children saw a 10% rise to £2,220. The bulk of the income in both groups came from one primary earner – 66%. This figure has dropped since last year when it stood at 72%, an indication that unemployment may be a factor.
Meanwhile those who were separated, divorced or widowed were amongst the hardest hit, with their income plummeting by a fifth on average, to just £1,075 per month.
Of the 10,000 individuals asked, the top priorities were found to be paying off their debts and cutting back on spending, with 35% and 39% of respondents naming them as their main focus for 2012.
However, the survey also revealed that finances are an uncomfortable subject for many Brits with more than one in four – 27% – confessing they would be reluctant to talk about their debts with family members. Only marginally less – 24% – said that they would not even be willing to discuss the subject of finances in general.
Nearly two in three of those asked – 62% – said that they were concerned about the continued rise in the cost of living, whereas 46% said they were worried about redundancy. Forty-one percent said they feared about how to meet the cost of unexpected bills and expenses.
The head of Aviva, Louise Colley, said that the results showed many households were ‘struggling to keep up.’ She added that some families had been able to ‘acclimatise’ by minimising their spending as well as researching before splashing out, but said that there was still a ‘worrying number’ with large debts or insufficient savings, or both.