The Aviva Family Finances Report

July 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 3 for groups tracked). As well as examining data since 2011, this edition goes back to school and puts a price on school education in 2013. It looks at how parents bills for a host of related expenses have evolved since 2008 and also examines the wider role of finances in childrens education. How far would parents go to access their preferred school, for example? How willing are they to pay for educational technology compared with more traditional pursuits like sports activities and out-of-school clubs? All of these questions and the resulting answers paint a picture of a modern family striving to find room in its budget to provide children with the best educational opportunities. Overview
l

Income more families receiving income from jobs as the proportion in the lowest income brackets fall (pg 4). Expenditure overall drop in monthly expenses masks the struggles of one-parent families despite cutting back on luxury items (pg 6). Family wealth saving habits improve as families seek out the greatest returns from financial products (pg 8). Housing wealth rising property prices benefit homeowners but overall homeownership falls (pg 12). Family borrowing unsecured debts hit record levels with fewer families making monthly repayments (pg 14). Look to the future fears grow as financial stability remains fragile and vulnerable to economic strains (pg 16). Spotlight nearly a third of parents have bought an iPad or tablet computer to support a childs education (pg 19) Spotlight more than one in ten parents have moved house to live in a better school catchment area (pg 20) Spotlight paying for school sports trips is more popular than funding foreign language exchanges (pg 21) Across the UK Family income in London reaches its highest level while the South West overtakes the capital in terms of families living in rented accommodation (pg 24).

The Aviva Family Finances Report 2

The modern UK family

Thirty years ago, the nuclear family of two parents and one or more children was commonplace among the UK population. Social change in the intervening years means family arrangements are significantly more diverse in 2013. In this report, Aviva explores the contrasting fortunes among the most common types of modern family based on customer profiles and Government data.

1. Living in a committed relationship* with no plans to have children

2. Living in a committed relationship with plans to have children

3. Living in a committed relationship with one child

4. Living in a committed relationship with two or more children

5. Divorced/separated/widowed with one or more children

6. Single parent raising one or more children alone

* For the purposes of this report, a committed relationship is defined as one where two people are either married or co-habiting.

The Aviva Family Finances Report 3

Income
UK families typical monthly net income in July 2013 fell just short of the highest figure ever recorded by the Family Finances Report, which was 2,150 in April 2012. With 2,108 at their disposal each month 5% more than a year ago the typical family has 1,260 more spending power over twelve months than they did in August 2012 when the typical monthly income was 2,003. Couples with one child have gained the most in the last year (241 per month) although those with no plans to have children remain the biggest earners (2,303).

Trends in net monthly income since January 2011

2,303 209 123 27

2,291 00 225 241

2,196 00 131
Couples with one child

Couples without plans to have children

Couples with plans to have children

2,264 149 18 27

1,190 00 15 41

1,050 00 55

Couples with two or more children

Divorced/separated/widowed and raising one or more children Gain since August 2011

Single and raising one or more children

Monthly income July 2013

Gain since August 2012

In line with the overall income growth, there has been a collective shift up the income scale in recent months. Just 20% of families currently survive on less than 1,250 a month, compared with 22% in January 2013. Low earners have made considerable progress since the first Family Finances Report at the beginning of 2011 when 30% fell into this category. Higher up the scale, more than one in three families now have a net monthly income above 2,500 (34%), up from 31% in January 2013. This marks a return to the same proportion of high earning families seen in January 2011.

Income sources
Nearly three quarters of families (72%) now receive an income from a primary breadwinners main job, compared with 70% at the start of the year. The number of families earning a dual wage also appears to be on the rise as parents pursue more job opportunities to boost their familys finances. A leap of seven percentage points means that 41% of families now receive income from a spouses full time job for income, compared with just 34% in January 2013.

Changing income sources

72% 70% 72% 34% 41% 34% 14% 13% 13% 7% 8% 6% 14% 5% 5% 3% 4% 3%

Income from primary job July 2013

Income from spouses job January 2013

Income from part-time/secondary job

Investments/savings

Income from spouses part-time/secondary job

Rental income

August 2012

The Aviva Family Finances Report 4

An increasing number of families receive an income from savings and investments in July 2013 compared with August last year (8% vs. 6%) which given the low returns on savings in the current climate may mean families are exploring alternative forms of investments. The percentage of couples with plans to have children who receive rental income has also doubled since January 2013 from 2% to 4%, suggesting that more may be renting out spare rooms or investing in buy-to-let properties to support their ambitions to raise a family.

The new welfare landscape

Benefit cuts as part of the current austerity measures have gradually reduced the number of families receiving income through the welfare system. State benefits helped nearly one in four families back in November 2011 (23%), but this had fallen to 21% in January 2013 and now applies to fewer than one in five families (19%). Since November 2011, the greatest loss of access to benefits has been experienced by divorced, separated or widowed parents (down from 41% to 36% receiving benefits), followed by couples with one child (down from 19% to 15%) and couples with two or more children (down from 22% to 20%). Only couples with no plans to have children have been unaffected (10% received benefits both in November 2011 and July 2013).

Families receiving benefits

10% 10% 7% 6% 19% 15%

Couples with no plans to have children

Couples with plans to have children

Couples with one child

22%

41% 20%

51% 36%

50%

Couples with two or more children

Divorced / seperated / widowed parents raising one or more children

Single parents raising one or more children

23%

19%

July 2013 November 2011

Overall

With more cuts on the horizon, it is likely these proportions will be further reduced in the months ahead. The Institute of Fiscal Studies recently suggested that having been protected by the benefits system, poorer households will be the hardest hit by additional cuts to be implemented up until 2015/16. This suggests the number of families receiving less than 1,250 each month may also start to climb again.

The Aviva Family Finances Report 5

Expenditure
The typical monthly expenditure among UK families fell for the first time since November 2011, with the July 2013 average of 1,748 representing a fall of 4% from the peak of 1,819 in January 2013. The latest figure is also slightly down from August last year (1,765) but still 16% more than the typical family was spending each month in August 2011 (1,510). Couples with no plans to have children have been the most successful in reducing their outgoings since August 2012 from 1,767 to 1,478 (-16%). Couples with children have also tightened their belts ever so slightly, although this amounts to a change of -2% for those with one child and less than -1% for those with two or more children. Coupled with the overall fall in monthly expenses, these figures mask the contrasting fortunes of other family types. Expenses have soared by 22% since August 2012 among divorced, separated or widowed parents raising one or more child. Single parents raising one or more children are not far behind having seen their typical monthly spend increase by 16%.

Monthly expenditure by different family types

1,767

1,478

1,716

1,915

1,872

1,837

1,841

1,834

1,426

1,735

1,231

1,426

-16%

+12%

-2%

<-1%

+22%

+16%

Couples without plans to have children August 2012

Couples with plans to have children

Couples with one child

Couples with two or more children

Divorced/separated/ widowed with one or more children

Single, raising one or more children

July 2013

Percentage change

These families in particular are likely to have felt the impact of 7.26% inflation on energy costs in the twelve months to April 2013, as well as 6.51% inflation on clothing and 4.49% inflation on food. Luxury items are among the first to go when it comes to trimming household expenses. While spending on food has gone up by 14 a month across all families in the last six months alone equivalent to 168 per year a range of non-essential items including satellite TV subscriptions, entertainment and recreation have all been scaled back to compensate.

The Aviva Family Finances Report 6

Reduced spending on luxury items

-21 -252 -11 AD M IT O NE -132 ADMIT ONE
Entertainment and recreation

-10 -120

-9 -108

Satellite TV subscription Per month Per year

Personal goods and services such as make-up and medicine

Postage, telephone calls and internet connections

Change in spend since January 2013

Financial constraints also appear to be prompting more families to forgo a holiday this year, with 51% spending on this expense in July 2013 compared with 54% in August 2012. However, those who do go on holiday are paying out more as their average spend has increased from 158 per month last summer to 172. In terms of prioritising family outgoings, the fact that monthly debt repayments have increased by 14 to 258 per month since January 2013 might suggest that reducing or clearing unsecured debts has become more important for UK families. However fewer families are making monthly debt repayments a trend which is visible across all family types. The biggest behavioural shifts over the last year have been among single parents, with 51% making monthly debt repayments in July 2013 compared with 68% in August 2012, and among divorced, separated or widowed parents of whom 52% currently repay debt each month, down from 67% in August 2012.

Families making monthly debt repayments

57%

45%

49% 36%
Couples without plans to have children July 2013

60%

48%

57%

43%

57%

46%

67%

68% 52% 51%

Single and raising one or more children

All August 2012

Couples with plans to have children

Couples with one child

Couples with two or more children

Divorced/separated/ widowed and raising one or more children

Though some of these families may have succeeded in clearing their debts, the fact that these family types have also seen their expenses increase the most suggests that many may simply find they are unable to keep up with monthly repayments.

It is reassuring to see that overall incomes have grown in the last year, and improving conditions in the job market will help some families to manage the impact of benet changes. For some the effort of balancing the books has meant sacricing luxury items, but despite these sacrices, one-parent families have still seen their expenses rise, which appears to have hampered their ability to repay debt.
Louise Colley, protection distribution director, Aviva

The Aviva Family Finances Report 7

Family wealth
Families extra income appears to be having a beneficial impact on their monthly saving habits. The typical family saves or invests 96 per month in July 2013, up by 20% from 80 in January to set a new record for the Family Finances Report. This is especially encouraging given that typical monthly savings or investments slumped to just 19 in November 2011 and after a brief recovery dipped again to 29 in July 2012. In simple terms, the biggest change in behaviour over the last two years has been among couples without children, who are saving or investing an average of 80 more than they were in August 2011, regardless of whether or not they plan to have children in the future. For the first time since the Family Finances Report began, fewer than one in three families save nothing each month (31%) a significant improvement on the 40% recorded in January 2011. Although single, divorced, separated or widowed parents continue to show signs of financial strain, their saving habits have also improved: 59% of single parents save nothing each month compared with 62% in January 2011, and 44% of divorced, separated or widowed parents save nothing compared with 55% in January 2011.

The savings message spreads: fewer families save nothing each month

40%

31%

42%

25%

32%

18%

34%

28%

All

Couples without plans to have children

Couples with plans to have children

Couples with one child

40%

32%

55%

44%

62%

59%

Couples with two or more children January 2011 July 2013

Divorced/separated/widowed and raising one or more children

Single and raising one or more children

Savings pots have risen as a result and since May 2011 the typical savings pot among UK families has swelled from 1,163 to 3,281 in July 2013. Over a third of families (35%) now say they are saving for a rainy day, compared with 32% in August 2012. A recent report from the Centre for Economics and Business Research (CEBR) suggested that savings will jump by nearly 20bn to 94bn in the next five years as families put aside nearly 7% of their post-tax income as a reaction to the financial crisis. This edition of the Family Finances Report also breaks new ground in terms of the number of families with no savings put away: down to 23% from a high of 33% in January 2011. One blot on the landscape is the fact that over half of single parents (51%) still fall into this category compared with just 15% of couples who plans to have children although this is still an improvement on the 60% of single parents with no savings in January 2011. Clearly some families continue to fight a tide of rising expenses to the extent that the typical single parent still has no savings put away and the typical divorced, separated or widowed parent has seen their savings fall from 499 to 205 since May 2011.

The Aviva Family Finances Report 8

Contrasting family savings pots in July 2013

30% Less than 500 saved Less than 2,000 saved More than 100,000 saved

26%
25%

26% 22%

27%

26%

23%

20%

18% 13%

17% 14% 12% 8% 6% 3% 4% 2%

Couples with one child Couples with two or more children Divorced / seperated / widowed parents raising one or more children Single parents raising one or more children

15%

12%
10%

11% 7% 8%

12%

5%

0%

All

Couples with no plans to have children

Couples with plans to have children

The overall percentage of families with savings below 500 (12%) is distributed more evenly across the family types, ranging from 8% of couples with no plans to have children to 17% of divorced, separated or widowed parents. The same is true for families with savings below 2,000: the overall figure of 23% includes 18% of couples with no plans to have children and 27% of divorced, separated or widowed parents. At the opposite end of the financial scale, the number of families with over 100,000 invested or saved has increased steadily from 4% in August 2012 to 5% in January 2013 and 7% in July 2013 the highest number seen by this report series. Couples with no plans to have children are the most likely to fall into this category (11%) followed by couples with two or more children (8%).

33% 23%

13% 12%

25% 23%

3%

7%

Families with no savings January 2011 July 2013

Families with less than 500 saved

Families with less than 2,000 saved

Families with more than 100,000 saved

The Aviva Family Finances Report 9

Families seek out favourable returns

The low rates available to savers have not reduced the appeal of making secure investments through Individual Savings Accounts (ISAs). Take-up of these products by UK families has risen from 36% in August 2012 to 41% in July 2013 with the biggest shift of 13 percentage points among couples with one child (up from 33% to 46%). While 6% of families continue to invest in fixed-term bonds the same as in August 2011 and August 2012 more than one in five now have premium bonds (21% vs. 17% in August 2012). The increased uptake of premium bonds has been largely driven by couples who do not plan to have children (up by eight percentage points from 21% in August 2012 to 29%). Having grown more accustomed to making regular savings and investments, low savings rates appear to have bred a greater tolerance for risk among UK families: 17% now invest in stocks and shares compared with 11% in August 2012 and 13% at the start of 2013.

Growing uptake of personal finance products

41%

36% 35% 35% 32%

36%

21% 18% 18% 17% 17% 17% 17%

13% 11%

7% 6% 6%

ISAs August 2012

Bonds - premium January 2013

Bonds - fixed-term July 2013

Stocks and shares investments

Pension - employer

Pension - private

The Aviva Family Finances Report 10

Interestingly, the growing interest in stocks and shares is most evident among couples with one child (up from 9% to 19% in the last twelve months). It suggests the act of becoming parents is prompting careful consideration of which financial products offer the greatest return to support their firstborns future. It also appears that messages about the importance of long-term saving are hitting home. Back in January 2011 just 28% of families had either a private or employer pension. However over a third are now saving through a workplace pension (36%, up one percentage point since August 2012) and nearly one in five have a private pension (18%, also up one percentage point in the last year).

Taking financial precautions

Couples with two or more children continue to lead the way when it comes to taking out life insurance policies. Almost 45% of these families have one in place, compared to an overall average of 36%. A range of 15 percentage points across the different family types means that, of the four main protection products life insurance, private health insurance, critical illness cover and income protection it is life insurance where the rate of uptake varies the most. It is encouraging therefore that despite being the least likely to have life insurance, single parents have noticeably increased their uptake to 21% from 17% in August 2012. Each of the remaining products is favoured most by a different family type. Couples who plan to have children are the most likely to have private health insurance (16%), couples with two or more children are the most likely to have critical illness cover (13%) and couples with one child are the most likely to have income protection (11%).

Given the atmosphere of austerity that has lingered since the Family Finances Report began, the renewed commitment to saving bodes well for the future. Despite the pressure on their purse strings, more families are taking steps to provide themselves with a nancial safety net. By considering a range of saving and investment products, they can nd a favourable return and make sure their money works as hard as it can for them.
Louise Colley, protection distribution director, Aviva

The Aviva Family Finances Report 11

Housing wealth
The property market has benefitted from increasing government support in the last twelve months with both the Funding for Lending Scheme (FLS) and Help to Buy schemes getting underway. But with deposit requirements still high and property prices on the rise, homeownership among UK families including those who own their homes outright or with a mortgage has dropped from 69% in May 2012 to 67% in July 2013. Couples who plan to have children are the most affected, with homeownership among this group having dropped from 56% to 50% during this period. Faced with the dual challenge of saving to support both a young family and a deposit on a home, they are choosing instead to rent or live with family in greater numbers. The percentage in rented accommodation has increased from 34% to 40% since May 2012, while the percentage living with family has risen from 2% to 3%.

Residential arrangements of couples with plans to have children

9%

12%
Own their home outright Own their home with a mortgage

47%

38%

Live in private rented accommodation Live in social housing such as council housing Live in sheltered housing - 0% Live with family

May 2012

July 2013

Other

34%

40%

6%

6%

1%

2%

1%

3%

Homeownership has remained relatively stable across other family types since May 2012: rising by just one percentage point among couples with one child (to 71%) and single parents (to 28%), and falling by the same amount among couples with two or more children (to 74%) and those with no plans to have children (to 72%). However there has been a visible shift into social housing which now provides a roof over the heads of 15% of all families in July 2013 compared with 11% in May 2012. This rising demand is in stark contrast to the falling investment in new housing by public corporations, which was down by 10.6m to 849m in the first three months of 2013, compared with the equivalent period in 2012 according to the Office for National Statistics. Growing interest in residential property contributed to a 2.7% rise in UK house prices in the 12 months to April 2013, but families have benefitted from a considerably higher rate of increase. Since August 2012 the value of the typical family home has grown by 3.9% to 218,760. Couples with two or more children continue to have the most valuable homes worth an average of 231,291.

The Aviva Family Finances Report 12

Increasing value of the typical family home

210,620

Typical house value

218,760
146,416

127,424 104,157 97,107

Mortgage debt Equity August 2012 July 2013

At the same time it also appears UK families have been actively reducing their mortgage debt, with the typical mortgage among those who have them weighing in at 97,107 in July 2013 compared with 104,157 in August 2012. This figure is still higher than any recorded during 2011. Nevertheless the competition between mortgage lenders means many families who have recently remortgaged or are looking to do so will notice that typical borrowing rates have greatly improved since then. In keeping with the trend for mortgage holders to reduce their outstanding debt, the typical homeowner now has equity of 146,416 tied up in their property. This has risen consistently over the last 12 months, having been 127,424 in August 2012 and 136,416 in January 2013. The latest figure is the largest since this report series began in January 2011.

Second homes
Rising house prices and the appeal of extra rental income have both added to the allure of property as a medium to long term investment. From November 2011 to January 2013 the percentage of families who owned a second property edged up from 20% to 21% and the same level of increase has been seen in the ensuing six months. The 22% of families who now count a second property alongside their main residence include those who have invested in buy-to-let properties, holiday homes or time-shares. The average value of these properties has fallen marginally since August 2012 from 185,824 to 184,947 while the typical mortgage has increased from 117,672 to 136,502 suggesting a recent burst of purchase and remortgaging activity.

Improving conditions in the property market will be a source of comfort to many families as they see their assets growing in value. An upturn in the mortgage market gives families an opportunity to get on the property ladder or remortgage. Its important though that people review their protection needs as and when their home situations change, to make sure they are on a rm nancial footing.
Louise Colley, protection distribution director, Aviva

The Aviva Family Finances Report 13

Family borrowing
Despite their growing incomes and greater commitment to saving every month, UK families regularly turn to unsecured borrowing in July 2013. In fact the typical household debt among UK families has grown consistently since May last year, and while the rate of increase slowed during the second half of 2012, it has picked up again since then. A 16% increase in unsecured borrowing in the first half of 2013 means the typical household debt now stands at 12,834, up from 10,563 in August last year and beating the previous record seen by the Family Finances Report which was 11,101 in January 2013.

Unsecured borrowing grows in the last year

12,834 10,563 11,101

August 2012

January 2013

July 2013

Credit cards remain the most common choice for families with unsecured borrowing, with a marginal increase of 1% since January 2013, boosting the percentage of families with credit cards to 40%. However the last six months have seen a general decline in the number of people using other forms of borrowing. While hire purchase has risen by two percentage points to 11%, the use of overdrafts is down by four percentage points to 22%. The frequency of personal loans (20%), doorstop lending (5%), store cards (11%), payday loans (5%) and pawnbrokers (3%) is also lower than at the start of the year, in each case by up to two percentage points. Considering the overall rise in unsecured borrowing, the figures suggest that some families are using their additional income and reduced expenditure as an opportunity to clear their debts, while those who continue to borrow are drawing on greater sums of money. This is backed up by the percentage of families making monthly debt repayments having fallen consistently in the last twelve months from 57% in August 2012 to 51% in January 2013 and just 45% in July 2013. While some families may have succeeded in clearing their outstanding debts, it is likely that others find they are unable to make regular monthly repayments.

The Aviva Family Finances Report 14

Concerns grow as fewer families make regular payments

12%

57%

11%

51%

14%

45%

August 2012 Families concerned about meeting debt repayments

January 2013 Families making monthly debt repayments

July 2013

Families are certainly growing more concerned about their ability to keep up with debt repayments. This now ranks among the three biggest threats to their standard of living for 14% of families compared with just 11% in both January 2013 and August 2012. Predictably the greatest level of concern is among single parents (22% vs. 20% in January 2013) followed by divorced, separated or widowed parents (18% vs. 20% in January 2013) and couples who plan to have children (17% vs.12% in January 2013).

The Aviva Family Finances Report 15

A look to the future

Ahead of George Osbornes latest spending review, a study by the Institute for Government (IfG) and the Institute for Fiscal Studies (IFS) suggested that austerity measures in the UK could still be in place when the 2020 election comes around. Despite improvements in their individual circumstances, families appear to have picked up on the sombre mood as their financial fears have noticeably increased in the last six months. Having succeeded in cutting their monthly expenses overall, the overriding worry among UK families is that the price of basic necessities will significantly increase (up from 56% in January 2013 to 63% in July 2013). The fear of unexpected expenses has registered the biggest rise since January 2013 and soared from 43% to 55% to become the second most common concern. It is worth noting that concern about unexpected expenses is highest among couples with no plans to have children (62%). However, given they are also the highest earners of any family type and close to being the lowest monthly spenders, their fears about unexpected expenses may be less severe than for other family types.

Financial fears increase since summer 2012

August 2012 Rising cost of living

58% 63% 12%

Inability to keep up with debt repayments

July 2013

43% 14% 55%

Unexpected expenses

5%
Lower savings rates

47% 4% 22% 23%

Loss / changes to current benefits system

48%
Redundancy

Nonetheless the overall rise in families reporting these concerns suggests many feel their financial situation remains fragile and vulnerable to economic stresses and strains. Given the loss of benefits to date, it is no surprise that a growing number see further benefit changes as a significant threat (23% vs. 20% in January 2013). Poor savings rates have also clearly registered as a concern with more families since the Funding for Lending Scheme (FLS) launched. Anxieties over savings rates have almost tripled from 5% in August 2012 to 14% in July 2013. Worries about a loss of income from investments have also more than doubled over the same period from 3% to 7%. Given that the FLS has prompted a price war among mortgage lenders and fuelled unprecedented rate reductions, it is surprising to see concerns over higher mortgage rates have risen from 13% to 16% in the last year. The government has also launched Help to Buy to improve access to the property ladder but given widespread speculation about a resulting house price bubble, it is possible these reports have influenced negative attitudes towards mortgage products.

The Aviva Family Finances Report 16

Spotlight: Putting a price on school education in 2013

Supporting their childrens progress through the education system is one of the biggest costs modern parents face. Even with state-run schools and colleges offering tax-payer funded education between the ages of three and 18, there are a host of associated expenses for parents to juggle. From technology and languages, to school meals and sporting activities, family finances have an impact across many aspects of education. Every parent wants to give their child the best start in life but exactly what kind of commitments does this entail? And when finances are limited, where do their priorities lie?

The yearly budget sheet

School-related costs have done little to buck the trend of rising expenses in the last five years. While the everyday costs for one child over the course of a school year stood at 1,449 in 2008 and just 1,300 in 2006 they have since risen by 11% to 1,614.

Basic school-related expenses per child per year:

369

379 558 108

Uniform

78

63

59

1,614

Transport

Food
including school dinners and packed lunches

Out of school care

(for example, breakfast clubs and after school care)

Shoes

Textbooks

Sports kit

Out of school care weighs in as the biggest cost for UK families who spend an average of 558 per child per year. Spend per family ranges from those who spend nothing each month to those who have a much greater need for support and spend upwards of 160 each month. Recent figures from the Daycare Trust and the Family and Parenting Institute show child minders who collect pupils from school typically charge 72.78 per week while the average cost of attending an after school club for 15 hours is 49.67 per week. This suggests that for those families who regularly rely on these services, the annual cost can exceed 2,000 per child, per year. Parents spending on school lunches for their children has remained stable over the last five years, having risen from 270 per child per year in 2006 to 358 in 2008. While more was spent on packed lunches than school dinners in 2006, the balance has since shifted: 14% more is spent on school dinners than on packed lunches in July 2013. More than half of parents prepare a packed lunch for their children (51%) while a further 6% have children who prepare their own. One in three parents favour school dinners (33%) while in 5% of cases parents provide money for their childrens lunch but allow their children to choose how and where they spend it. Couples with two or more children are the most likely to make packed lunches (54%) followed by couples with one child (50%). Despite the higher cost of school dinners, the time-saving aspect means that 43% of single parents choose this option along with 35% of divorced, separated or widowed parents; just under a third of couples do the same (32%).

The Aviva Family Finances Report 17

Typical school lunch preferences across family types

32%

50%

5%

6%

32%

54%

6%

5%

35%

45%

7%

4%

43%

35%

9%

7%

Couples with one child

Couples with two or more children

Divorced/separated/widowed with one or more children

Single, raising one or more children

School dinner

Packed lunch that I make for them I give them money to buy food from the shops as they choose

Packed lunch they prepare themselves

Going green on the school run

Despite rising fuel prices the cost of school transport has also remained stable over the last five years rising by a mere 3 since 2008 when the average spend was 366. This has been made possible by the fact that fewer parents are taking their children to school by car: just over a quarter of all parents do this now (27%) compared with a third back in 2008 (33%). Instead, over half of all parents say their children typically travel either on foot (47%) or by bicycle (3%). Couples with one child are the most likely to use a car to drop their children off at school (34%) while walking to school is most common among the children of single parents (53%). When it comes to other methods of travel, making use of public transport (12%) is marginally more popular across all families than using school buses (11%).

How children typically travel to and from school

Couples with Couples with two one child or more children 38% 50% Divorced / seperated / widowed parents raising one or more children 45% Single parents raising one or more children 53%

All

On foot

47%

By car I/we drop them off

27%

34%

26%

21%

21%

By public transport e.g. train/bus

12%

14%

10%

13%

12%

By school bus

11%

10%

10%

15%

9%

By bicycle

3%

4%

3%

4%

2%

The Aviva Family Finances Report 18 The Aviva Family Finances Report 18

Nurturing young talent

Supporting a childs interest in music or sport can have a significant impact on the overall cost of school education. Nearly one in five parents pay for music lessons for their children (19%) which adds an extra 480 to their annual outgoings. Almost one in four pays for the purchase or hire of a musical instrument (22%) which typically costs 106 per year. Taking part in sports activities outside of the usual school timetable for example, out of school practice sessions and weekend fixtures costs an average of 327 per year for parents who pay for their children to do this. However parents have successfully reduced the core cost of providing sports kit for their children. This added up to 169 a year in 2008, but with many supermarkets and high street retailers offering low-cost school clothing ranges, sports kit now makes up just 59 of the typical parents yearly spend. Getting involved in other school events such as discos and proms result in parents spending an extra 59 a year on average, while fundraising events including non-uniform days add 44 to their bill. At 120 per year, the cost of attending school trips is higher than these two school-based activities combined, but 71% of parents provide this support nonetheless.

The price of technology

Technology is an ever-increasing feature of many childrens educational experience, both in and out of school. The typical parent spends 132 per year on this expense, including educational games and DVDs as well as the hardware itself, making technology almost twice as big an investment as textbooks (63). To support their childs education, more than half of parents have bought a laptop or computer (58%) with divorced, separated or widowed parents the most likely to have done so (65%). When it comes to buying other technology products to help their childrens learning process, couples with at least two children are more likely to have done so than those with just one child suggesting a degree of sharing between children is involved. Nearly three in ten couples with two or more children have bought an iPad or tablet computer (29%), compared with 27% of couples with one child and 28% of parents overall. While just 15% of couples with one child have bought them an e-reader, one in five couples with at least two children have done the same (20%) compared with 18% of parents overall.

Parental attitudes towards buying educational technology

58%

35% 28% 22% 7% 28% 18%

33% 33%

iPad/tablet

Laptop/computer

Kindle/e-reader

Have bought this for their children Would buy this for their children Would not buy this for their children

The Aviva Family Finances Report 19

Location, location, location

From community and foundation schools to academies and grammar schools; from faith and free schools to city technology colleges and private schools: todays parents are faced with an array of options when it comes to their childrens education. The quality of local schools is therefore a key consideration for parents who are looking to move house. Almost half of parents (45%) rank this among their top three priorities when buying a house along with the safety of the surrounding area (73%) and the proximity of local shops and amenities (48%). Living near to good quality schools is therefore more important than having good public transport links or friends and family nearby (both 32%). More than one in ten parents have moved house to live in a better school catchment area (11%) with couples with two or more children the most likely to have done so (13%). A further 30% of all families with children say they would take this step to support their education. Another option is to rent property in a particular catchment area to access the local schools. The 5% who have done this include 8% of single parents, who are more likely than the UK average to live in rented accommodation (23% compared with 16%).

Spending outside the classroom

Paying for education often extends beyond the classroom and todays parents can find that a range of extracurricular activities are available to their children, finances permitting. Among the choices on offer parents are most willing to pay for field trips within the UK (69%), for example to museums or historical attractions. Sports clubs or regular sporting activities such as evening or weekend football training come second in terms of attracting parents funding (63%) while educational field trips abroad are the third most popular extra-curricular investment (54%). The emphasis on learning modern languages in UK schools has often been questioned with a recent report from the British Chambers of Commerce highlighting a major shortfall in foreign language skills among the UKs business community. In this context it is interesting that more parents are willing to fund sports trips for their children (35%) than foreign language exchanges (33%). Given their lower incomes, one may assume that one-parent families (including those who are single, divorced, separated or widowed) might be less willing to fund extra-curricular pursuits. But other than sports trips, they are within six percentage points of the UK average in each case with single parents in fact the most willing of any family type to pay for out-of-school sports clubs (67%).

The Aviva Family Finances Report 20 The Aviva Family Finances Report 20

Willingness to pay for extra-curricular activities

UK average Sports clubs, for example evening/weekend football practice Sports trips, for example ski trips or rugby tours UK field trips Foreign field trips Foreign language exchanges None of the above 63% 35% 69% 54% 33% 18% One-parent families 58% 26% 63% 49% 30 % 22%

Funding leisure pursuits while schools out

The long summer holidays are a considerable perk for teachers but leave parents considering how best to keep their children entertained and how much this might cost. Active pursuits are the most popular with parents across the board with trips to the cinema, museums or exhibitions and theme parks attracting the most financial support. Social engagements with friends and family also feature prominently while house-bound activities such as playing video games or watching DVDs are the least attractive to parents.

Activities parents are willing to fund during school holidays

Trips to the cinema 63%

Trips to a museum/exhibition

50%

Eating out with friends/family

39%

Trips to a theme park

40%

Shopping trips with friends/family

22%

Trips to a sporting event (e.g. football match)

18%

Video games or DVDs

17%

One parent families are more likely than the UK average to fund cinema trips (68% vs. 63% - UK) but less willing to pay for a trip to a theme park (33% vs. 40% - UK). Interestingly, single parent families are the most likely by a noticeable margin to fund at least one of these summer holiday activities: just 5% are unwilling to fund any of the options given compared with 9% of all families.

The Aviva Family Finances Report 21 The Aviva Family Finances Report 21

The overall picture

Despite the 11% rise in the cost of schooling since 2008, exactly half of parents feel comfortable that they can afford all the expenses of sending their children to school (50%) with nearly one in five saying they feel very comfortable (19%). The overall outlook is significantly more positive than in 2008 when 70% of parents said they were concerned about how they would afford all the costs of sending their children to school. Only three in ten hold this view in July 2013 (30%) with just 9% being very concerned. Even among single parents the group with the greatest level of concern in 2013 only 37% express a worry about meeting educational costs. For 14% of all parents, the cost of schooling is not an issue because they feel it is essential in order to benefit their children. However, 6% can afford the basics but feel pressured to spend more than they would like so their children do not miss out. Divorced, widowed or separated parents are most likely to feel this way (13%) followed by single parents (9%).

Sentiment about the cost of schooling across family types

Couples with two or more children 54% 29% 5% Divorced / seperated / widowed parents raising one or more children 33% 30% 13% Single parents raising one or more children 36% 37% 9%

All

Couples with one child 53% 29% 6%

I feel comfortable that I can afford all of the costs I feel concerned that I cannot afford all of the costs I can afford the basics but feel pressured to spend more than Id like to so my child doesnt miss out I have not really thought about it as they are costs that must be met for the benefit of my child

50% 30% 6%

14%

12%

13%

24%

18%

Counting the cost of university fees

Looking beyond the cost implications of early years, primary and secondary education, the rise in university tuition fees to a maximum of 9,000 a year has been one of the major educational discussion points and controversies in recent years. The response from UK families has been varied and it is potentially a concern that just 14% of parents say the increase has prompted them to save more to support their childrens future in higher education. This includes 6% of parents who have been prompted to start saving by the increase and 8% who were already saving and are now saving more. Another 14% were already saving and have been unmoved by the change in tuition fees policy, while 10% who are currently putting money away are worried it will not be enough. University fees are clearly a growing concern for UK families: one in ten (10%) count paying for significant expenses such as university among the three biggest threats to their standard of living in July 2013, double the number who said the same in August 2012 (5%).

The Aviva Family Finances Report 22 The Aviva Family Finances Report 22

Reactions to higher university fees among different family types

21% 18% 9% 8% 4% 8% 6% 5% 11% 13% 9% 5% 10% 7% 27% 11% 7% 3% 2% 10% 6% 36% 5% 12% 4% 6% 31% 8%

Couples with one child

Couples with two or more children

Divorced/separated/widowed with one or more children

Single, raising one or more children

I have not started saving because I cannot afford to I am already saving and havent increased the amount Im putting away Im saving but Im concerned that Im not saving enough I was already saving and am saving more since the fees became more expensive I have not started saving because university isnt important for my children I have started saving since the fees increased I have stopped saving / am saving less because of other financial pressures

Of further concern is the fact that 5% of families say they have actually stopped saving or are saving less since the fees increase because of other financial pressures, while more than one in four (26%) have not started saving simply because they cannot afford to. This predictably includes larger numbers of one parent families 36% of divorced, separated and widowed parents along with 31% of single parents but even among couples with one child, more than one in five have not started saving due to a lack of funds (21%).

Tuition fees may have hit the headlines but an 11% rise over the last ve years in the basic costs of schooling will stretch many families budgets long before they consider supporting their children through university. As a parent it is natural to want the very best opportunities for your child. Building a healthy savings pot is one way to open doors for them and fund extra-curricular activities so they can develop new interests and get the most from their school years.
Louise Colley, protection distribution director, Aviva

The Aviva Family Finances Report 23 The Aviva Family Finances Report 23

The view across the UK

Summary
Families in London have the highest monthly incomes across the UK (2,900), marking a record high in income levels since the Family Finances Report began in January 2011. Monthly incomes in the South East continue to be higher than the average (2,273 versus 2,108 UK), although families in East Anglia are not far behind (2,249). The lowest incomes in the UK can be found in Wales, the North East and the North West, where average monthly incomes currently stand at 1,700, 1,856 and 1,968 respectively.

Assets and savings

Average total savings have grown across the board in July 2013, with families in the capital having the biggest savings pots (11,499) followed by the South East (6,249) and East Anglia (4,332). In comparison, families in the North West have just 943 in savings, while those in the North East are not much better off (998). Over three quarters of Londoners (78%) are dedicated to making monthly savings: however, in Yorkshire and the South West monthly savings are falling behind, with 62% and 64% saving on a monthly basis respectively.

Borrowing
Credit card borrowing is most prevalent in London in July 2013, where 49% have credit card debt and an average bill of 3,278. While fewer families in the North East (44%) have credit card debt, they owe 4,285 on average: the highest amount of any UK region. In the North West, 40% of families owe an average of 2,152 on their credit cards. Although Londoners have the highest average monthly incomes as well as the highest prevalence of credit card debt, both the North East and North West owe significant amounts despite having some of the lowest income levels in the country. This suggests there is not necessarily a correlation between areas of lower household incomes and levels of credit card borrowing.

Housing
London house prices continue to be higher than in the rest of the UK, although they have dropped slightly from 371,081 in January 2013 to 342,126 in July 2013. This figure still represents a significant divide from the rest of the UK, sitting at over 100,000 more than the national average (218,760). In contrast, the average family home in the North East is valued at just 152,667: even lower than last quarters figure of 159,856. The South West has overtaken London in terms of the highest proportion of families in rental accommodation in July 2013 with 22% renting compared to just 18% in the capital. In contrast, renting figures are at their lowest in Scotland (11%), the West Midlands and East Anglia (both 13%).

Long-term financial security

Despite having the highest incomes and most valuable homes, families in London are some of the least likely to have started paying into a pension (32%), beaten only by those in the East Midlands (31%). In contrast, Scottish families appear to be most concerned about safeguarding their financial futures. Almost half (43%) have purchased life insurance, while 14% have critical illness cover (vs. 11% nationally). They are also the most likely to have begun contributing to a workplace pension (42% vs. 36% nationally).

The Aviva Family Finances Report 24

Average monthly income Average total savings Average monthly savings Credit card borrowing Average house value

Scotland

2,080 2,665 93 1,856 909 167,608 998 91 4,285

N. Ireland
1,999 124 74 1,057 167,857

152,667

N. West
1,968 943 83 2,152

N. East

1,970 1,998 88 182,100 1,463

177,007

Yorkshire

E. Midlands
2,083 2,881 109 2,042 3,410 86 190,341 1,700 1,199 87 170,663 1,878 1,171 1,283

173,235 2,249 4,332 106 242,055 1,881

W. Midlands S. West East

2,273 6,249 97 275,774 2,136

Wales

1,986 3,713 97 215,777 1,643

London

S. East

2,900 11,499 188 342,126 3,278

The Aviva Family Finances Report 25

So what does this tell us?

We can see from this edition of the Aviva Family Finances Report that despite welfare changes, the overall picture in terms of family income is relatively encouraging. Cutting back on luxury items is helping some to manage their outgoings, although rising expenses have hit one-parent families especially hard over the last twelve months. The suggestion that families are saving more to guard against future difculties already seems to be having an effect, with larger numbers able to make space on their monthly balance sheets to put some money to one side and increase their savings pots. However, any benet may be cancelled out by the fact that it is becoming less common to make regular debt repayments. This in turn has contributed to the overall rise in unsecured borrowing. Looking at the sums involved in sending their children to school, we can see that parents are confronted with a number of nancial decisions that have a direct impact on their childrens learning and development. In one sense there are plenty of opportunities for them to widen their childrens horizons by supporting extra-curricular activities. But families whose budgets are already stretched are likely to feel under considerable pressure to spend more than they can afford. Saying that, parents seem to be determined to nd the cash to help their children to explore an interest in music, technology, languages or sports. This may help to explain the overall trend among families to restrict their monthly spending on non-essential items and use more cost-effective methods of transport rather than relying on their cars for the school run. Families improved savings habits will certainly help to manage extra costs as their children progress at school. The more parents can keep this going, the better placed they will be to support their children beyond the age of 18 and help them to meet the costs of studying at university. The rising worries among UK families show there is clearly some way to go before they can set aside their nancial concerns and concentrate on a brighter future. Exploring ways to safeguard their money through investments or protection products can ensure they have something to fall back on if circumstances change so they can continue to support their children as they learn whatever the future holds. Louise Colley, protection distribution director, Aviva
The Aviva Family Finances Report 26

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 to produce the reports latest findings. In total, 18,222 UK consumers have been interviewed between January 2011 and July 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 July 2013 unless stated otherwise.

Additional data sources include:

l l

Office for National Statistics, Labour Market Statistics, May 2013 Institute for Fiscal Studies, The Short- and Medium- Term Impacts of the Recession on the UK Income Distribution, June 2013 Office for National Statistics, Output in the Construction Industry for March and Q1 2013, May 2013 Office for National Statistics, House Price Index April 2013, June 2013 Institute for Government and Institute for Fiscal Studies, The 2015/16 Spending Round, June 2013 Office of National Statistics (ONS), Inflation Figures, June 2013 British Chambers of Commerce, Exporting is Good for Britain: Skills, June 2013 Daycare Trust and Family and Parenting Institute, Childcare Costs Survey 2013, March 2013 Centre for Economics

l l l l l l

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. 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 27

106003815 07/2013

Aviva plc