Families with children facing big money problems

11/11/2009

Young families in the UK are leaving themselves financially exposed to debt risks, as rising childcare costs leads them to dip into their existing savings.

According to research cited in a new report from Abbey Savings, the amount spent by the typical family on care has risen by 6.5 per cent since December 2007.

The data, originally from insurance firm Liverpool Victoria, shows that looking after a child can cost up to £54,000 from when he or she is six months old to when they reach the age of 14.

Abbey Savings' own research showed that 20 per cent of UK families with children of primary school age or below have less than £1,000 in savings, while a further 28 per cent have nothing saved at all.

This group therefore faces a higher risk of falling into debt problems if they face a sudden loss of personal income, such as through job loss.

Childcare from six months until the age of 14 could cost as much as £53,818, or £332 a month, for a typical UK household with two working parents.

Reza Attar-Zadeh, director of savings and investments at Abbey, commented: "It's vital for everyone to have a rainy day fund, even more so for parents, who must juggle the need to build up a nest egg for their children's future with the need to provide for the here and now."

EuroDebt director Kevin Still said: "In the current financial climate many people are trying to balance being thrifty with meeting the demands and expectations of their children, even 'kidults' (grown up children). Many parents are vulnerable when they have one or more children, especially young children, to having to take time off work or work shorter hours.

He added: "This generally occurs at a time when maximising income is critical. Millions of families are currently playing a juggling at with their personal finances and many do not have a nest egg of any kind and may not have equity in their property either. With a tough economic climate predicted by the Bank of England until the end of 2011 and the housing market dragging along bottom, it is likely that many families will need to take some action to deal with their debts. Many homeowners have used the reduced interest rates to pay off unsecured debts rather than save. Effective budgeting is an absolute priority and planning for birthdays and Christmas should be thought about in advance."

Tags; Budgeting Advice, Young Family Finances,

Regional Debt Advice; Debt Advice Liverpool,

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