Happier families more positive for their financial future
The latest Lloyds Bank Family Finances report reveals feelings towards the economy are growing evermore positive across all household types. Although people still feel negative overall, the percentage balance of opinion on the country’s financial situation has significantly increased, growing more positive, since the last autumn statement from -54% to -35%.
It’s not hard to see why feelings are improving. In quarter three of 2014, GDP grew by 0.7% on the previous quarter, while inflation levels of the Consumer Prices Index have remained below 2% for the whole of 2014 and are now at 1.2%. The number of people out of work reduced by 510,000 in the 12 months to September 2014 that included unemployment falling by 115,000 to 1.96 million in the three months to the end of September. In addition, the 12 months to October 2014 saw average house prices increase by over £14,000, giving people more equity in their homes.
As you might expect, households without children are significantly more positive about their household financial situation than those with children, with a 16% balance of opinion, doubling in positivity from 8% in October 2013. This compares to those households with children who are moving towards a positive sentiment, with the figure currently at zero, significantly increasing from -13% last year.
Outlook for the future
Despite feeling the pinch more, and having the lowest levels of disposable income, families are the more positive towards their future financial situation than those without children. Surprisingly, their overall sentiment is positive (16%) towards them having more disposable income in six months time, whereas those without children are still neutral at 0%.
Philip Robinson, Savings Director for Lloyds Bank said; “Families are still feeling the pinch with spending on bills continuing to take up most of their household income. Improvements in the wider economy have not yet taken the pressure off household finances but these improvements are having some effect, with families thinking they’ll have more disposable income in six months time.”
Household spending is still tight for families
Despite financial positivity improving for families, overall sentiment towards their financial situation is still not positive. Seven in ten households with children spend at least three quarters of their income on bills and essentials. One in five, (20%) spend all of their income each month, leaving them without any disposable income.
Compared to last year, many households feel they’re spending more on basic essentials. Half (50%) said they’re spending more this year on utility bills, over a third (37%) said they are spending more on water, 44% for petrol and 46% for groceries. 60% of those with children spend £250 a month or more on groceries, whereas only 35% of those without children spend the same amount.
In addition to spending more on essentials, many people also believe they’re spending less on leisure items (42%) and clothes (34%) when compared to last year.
Savings levels remain low
Just under a third (32%) of families didn’t save any money in the last year, up 2% on the year before. Meanwhile, looking more broadly across the nation, half the population (50%) have less than two months’ income in savings, which, based on average UK full time earnings, is less than £4,308. This figure includes 35% of people who have less than one months’ income (£2,154) saved. Only 20%% of the population have more than four months’ of income in savings, which equates to savings in excess of £8,616, based on the average full time salary.