A new report from Royal London reveals that surging costs in housing, energy, food, and childcare since February 2023 have significantly strained family finances, with average expenses for families with young children rising by over £1,000 a month. This escalation has left nearly one in five parents (18%) without the means to handle unexpected bills or emergencies, fueling concerns over financial and emotional well-being.
Financial Strain Affects Family Planning
The “Financial Resilience Report 2024 – Weathering the Cost of Living Crisis” highlights the substantial impact of escalating daily expenses on personal and financial decisions. Approximately one in ten people (10%) report that the cost of living crisis has directly influenced their family planning decisions, with considerations to delay having children or reduce the number of children they plan to have. This sentiment is even more pronounced among young adults aged 18-34, where more than one in five (22%) acknowledge that financial pressures have forced them to reconsider their plans for starting a family.
Emotional and Economic Impact
The financial squeeze is not only affecting wallets but also mental health. About 31% of UK residents express fear about the future, while 40% of parents with children under three report feeling lower in mood. Additionally, over a quarter (27%) of this group feels ashamed about their financial stability, illustrating the deep emotional toll exerted by the ongoing economic challenges.
Generational Financial Pressures
Although individuals between 35-49 years old typically have the highest average annual personal income, 20% are nearing or already experiencing a financial crisis, with average monthly outgoings increasing by £588 since early 2023. This has left 34% of them regularly overdrawn or borrowing to meet monthly expenses, and nearly a quarter (23%) completely devoid of savings.
Rising Interest Rates and Mortgage Pressures
Sarah Pennells, a consumer finance specialist at Royal London, notes the significant impact of high interest rates and increasing mortgages, particularly on those in their 30s and 40s. “Interest rates on overdrafts can be high, and if you’re dipping into your overdraft regularly, that could be a warning sign that your finances may not be sustainable,” Pennells explains. She suggests that even anticipated cuts in interest rates by the Bank of England might not alleviate the burden for those already locked into higher mortgage rates.
Strategies for Financial Resilience
To combat these financial pressures, Pennells recommends practical steps such as creating a budget and keeping a spending diary to track and manage expenditures more effectively. For those struggling with immediate financial needs, considering options like payday loans could provide temporary relief. However, it’s crucial to approach such solutions with caution due to potentially high interest rates and the risk of creating a cycle of debt if not managed carefully.
Conclusion
As the cost of living crisis continues to shape the economic landscape, affecting decisions as fundamental as family planning, the importance of financial literacy and proactive financial management becomes increasingly clear. For many, understanding and utilising available financial tools responsibly, from budgeting strategies to carefully considered credit options, will be key to navigating these challenging times.
