Monthly incomes at highest level since 2010 but debt burden remains high
A typical family’s monthly take-home income is now £2,151, up by £128 since last winter and the highest level since 2010, when Aviva first started tracking information for its Family Finances Report.
Families have benefited from the 2.6% increase in national wages, unemployment being at a 10-year low in the first quarter of 2016, and the introduction of the National Living Wage in April.
The report found single, unmarried parents raising children alone have seen a 17% monthly income increase. This could be down to the percentage of families with benefits as a source of income dropping to its lowest level since 2010, and because more parents are receiving income from a primary job (from 66% to 71%).
However, these families remain the lowest earners with monthly take home income of £1,173, some 45% below the typical family.
Savings boost but debt still high
As incomes have risen, families have saved or invested more, with the amount set aside by the typical family up by 42% year-on-year to reach £4,426.
Families are also spending less on the weekly food shop – £200 from £206 – and utility bills have also fallen slightly from £293 to £289 per month.
However, despite rising incomes and lower spending, Aviva reports that average household debt is almost a fifth higher than it was last summer at £11,250.
The average amount borrowed using payday loans has risen by 76% from £370 to £650.
But the amount of debt owed through an overdraft has dropped year-on-year by almost a quarter (24%) from £870 to £660.
Comparing different family groups, married or cohabiting couples have two and a half times more household debt in total than parents raising children alone (£11,730 vs. £4,660). Couples with two or more children have the greatest debt among all family groups (£15,330).
Outstanding mortgage debt has also continued to rise by 3% since last summer and now stands at £66,580.
Louise Colley, customer propositions director at Aviva, said: “The financial situation for families has shown encouraging signs of improvement recently, with both incomes and savings levels now standing at their highest level since 2010. This has been buoyed by record low levels of unemployment, which looks to have given a boost to families across the income spectrum.
“That said, income inequalities persist across different family groups, and the family purse has also been affected by a simultaneous rise in levels of household debt in the last year. With the economic outlook more uncertain in light of Brexit, families need be doubly sure they are able to manage their commitments effectively in the coming months ahead.”