Parents give up work as childcare costs outstrip income
Parents are questioning whether they can both afford to work, due to the high cost of childcare. According to new research from Aviva, a working mother could be up to £98 a month worse off after all child and work costs are taken into account.
As a result, thousands of families could be left in the potentially vulnerable position of relying on a single salary. More worrying still, the Aviva study shows 95% of UK families don't feel completely financially protected against the loss of an income.
Significant childcare costs:
An in-depth analysis of childcare costs reveals the financial struggles that many working parents face, with typical full-time care costing £385 per month per child. Parents who need full-time care for children under two have to pay the most (£729 per month) while those with older children who need part-time care pay the least (£78 per month).
While 54% of families claim they don't use childcare and 31% say their family/friends provide this for free, those parents who do pay can find it incredibly difficult to juggle their finances. Even those who don't pay for childcare find that they are spending an average of £111 per month on child-related expenses such as sports activities, food at school, clothing and transport - costs which have seen inflation of 6.89% over the last year.
Cost of employment:
In addition to childcare and schooling costs, the average working family member spends £120 per month (full-time) and £90 per month (part-time) on expenses associated with employment such as transport, food and clothing.
Therefore - when all costs are taken into account - the average woman with two children (one year and seven years old) would be out of pocket by £98 per month if she worked part time, and better off by just £120 per month if she worked full time [see notes to editors]. While Government benefits could provide some support, many families have seen cuts in this area and may need to consider whether this kind of support is sustainable going forward.
Single income families leave themselves exposed:
With some women finding their income eroded by the associated costs of working, it is unsurprising that 32,000 more women have chosen to stay at home to look after their families since Q3 2010. However, while this can make financial sense, it can leave families in a vulnerable position if the main breadwinner is unable to work for any reason.
Worryingly few families appear to be taking proactive steps to protect themselves: 60% are without life insurance, 85% are without critical illness cover and 90% are without income protection. Instead, should the average family lose one income, they would look to cut spending to a minimum (51%), turn to the Government for help (28%) or dip into their savings (25%). Although with average savings at just £982 or under half a month's income, this is unlikely to last long.
If they were faced with a permanent loss of an income, families' immediate worries would be about meeting their bills (71%), maintaining their standard of living (42%) and being forced to move home (37%) - all stressful issues to deal with at a time of great need.
Children are also a major concern in this scenario, with 29% of parents worried about how this might impact on their behaviour and 23% concerned about their performance at school.
Louise Colley, head of protection for Aviva and mum to four-year-old twins comments: "This report shows very clearly the challenge many families with young children face as they balance their income with the cost of childcare. As care costs rise, it's quite possible we will see more and more couples relying on one salary while the other person looks after the children - simply because they may actually be worse off if both people work. However, while this may make financial sense, it can also leave families vulnerable should anything happen to that income earner.
"Families today face an array of money worries, as this report shows. But the unintended consequences of not having protection in place can be huge - both financially and emotionally - should the unexpected happen. Sixty percent of families don't have even basic life insurance so we'd strongly urge all families to consider the 'what ifs' and take steps to make sure they're covered. After all, we go out to work to do the best for our families but if we don't have suitable protection, we could be leaving them financially exposed."