Families with children at home ‘face £1,000-a-year savings gap’

Families with children living at home are able to save around £1,000 less per year on average than households with no children, according to analysis.

Households with children typically save around £79 less than households without children each month, Cebr (the Centre for Economics and Business Research) and comparethemarket.com found.

This adds up to a savings gap of around £950 over a 12-month period.

The report said that for households with children, average earnings were down by £62 per month last July, compared with before the coronavirus pandemic, potentially adding up to an annual shortfall of more than £740.

Households without children had an average fall in monthly earnings of £3 last July, adding up to £36 if the decrease continued for a year.

The average monthly amount saved by adults in single parent households in November 2020 was £68. This compared with £235 among those in two-parent households and £239 among those in working-age households without children.

One in seven (13%) people in single parent households saw their debts go up in November 2020, compared with 7% of those in two-parent households and 5% of those in working-age households without children.

During that month, people in single parent households typically estimated there was a 20% chance they would face difficulties paying their bills over the next three months, as did 11% in two-parent households and 9% in working-age households without children.

The report also found that more than than two thirds (68%) of the top fifth of earners were able to save early on in the pandemic, compared with only a quarter (27%) of households in the bottom income fifth.

Ursula Gibbs, director at comparethemarket.com, said: “The pandemic has had a devastating impact on individuals, households and families, testing many of us in ways we have never experienced before.

“Sadly, the impacts of the Covid-19 pandemic – physically, mentally and financially – have been more acutely felt by those on lower incomes, and those caring for children.

“Even for those fortunate enough to be working from home, it has been a real challenge to look after children while meeting the demands of a job.”

The report used data from the Economic and Social Research Council’s UK Household Longitudinal Survey (UKHLS).

Sharon Collard, a professor of personal finance and research director at the University of Bristol, said: “These findings corroborate our research, which estimated three million children in the UK live in a family that is struggling to buy food and other essentials; 4.5 million live in a family that is using consumer credit to make ends meet; and almost five million live in a family with no savings buffer.

“Some families with children are much harder hit than others, though, and those bearing the brunt include single parents, families on lower incomes, families in rented homes, and families with a parent whose daily activities are limited a lot by ill health or disability.”