Recession Hit Families in England Focus on Saving for the Future According to New Research

At a time when the next Government will be looking to make savings in public expenditure, initiatives to encourage families to save must be expanded not cut argues leading think tank the Institute for Public Policy Research.

Innovative new ippr research  analysing the behaviour of low-income families in London, Newcastle, Nottingham and Glasgow looks at how the recession has changed the spending, saving and borrowing habits of families. It shows that although many low-income families want to save money, they are struggling. This is because increases in the price of necessities like fuel and food, and rising unemployment have disproportionately affected low-income families.

ippr found when speaking to low-income families around the country, that most parents felt considerable pressure and anxiety about their ability to provide for their children now and in the future.

ippr argues that at a time when public expenditure is under scrutiny, initiatives to encourage families to save must be expanded, not cut. The Conservatives have recently announced that they would drastically cut back the Child Trust Funds (CTFs), so only the poorest third of families and disabled children would get one in future. This would mean that children in families with an annual household income of just £18,000 would no longer have this asset.

Carey Oppenheim, Co-Director at ippr said:

“Our research shows that parents want to save for their children’s future. The Child Trust Fund offers a way for parents to know that their children have some savings – and it may be the only way to ensure all children have a stake in society when they enter adulthood.

“Conservative Party proposals to cut the Child Trust Fund so that only the poorest one third of families and disabled children get one in future is inconsistent with George Osborne saying that at every stage the Conservatives will support a culture of savings.

“Our research shows that families on low and modest incomes consider saving for their children very important but really struggle to do so.”

ippr has shown that the CTF is a success story, although the real test of its success will come when today’s seven year olds – the first to have accounts – turn 18.

Nonetheless, to date more than 4.5 million children already have open, active CTF accounts. Savings rates by families on behalf of children have trebled, two million parents are saving for their children each month. The monthly amounts being saved for children are up from £15 to £24 since CTF was introduced – a 60 per cent increase.

Families in all income groups are embracing the CTF, including low income families, 30 per cent of whom add monthly to their child’s CTF. That means more than £2bn has been invested in children’s futures.

ippr’s spending and debt research also shows:

• Many families are using community based and informal approaches to saving, as a result of hostility towards and a lack of trust in the banks – particularly as guarantors of savings. The research has found that knowing and trusting the people who worked in the credit union or run the savings scheme is seen to be an important factor for the families.

• Many families feel less financially secure compared with the same time last year and are concerned about their future financial stability.

• Families told us how they prioritise their children’s needs – often using sophisticated budget and coping strategies – to make sure that their children are not going without.

Topics: borrowing habbits, Britain, Conservative Party, Economy, education, employment, England, familite, food, fuel, global economic downturn, Governance, jobs, low income families, recession, savings, society, UK, United Kingdom

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