Austerity measures pound family savings
Nearly half of all British families will spend an average of £386.76 from their savings to pay for everyday expenses this year, according to mutual society Family Investments.
The society's report, UK Mums' Budget, shows 47% of families across the country will have to use money from their savings to pay – equivalent to about £8 a week - for day to day living.
Saving remains British mums' second biggest priority, says the report, but some are paying less into their pensions - the survey found that 18% of mums were cutting their pension contributions by an average £159.60 a year.
Chancellor George Osborne delivers his Budget this week and says he will stand by earlier proposed tax rises, in spite of the pinch most UK families are feeling.
On top of this, utility prices are costing families on average £36.76 a week and rising fuel costs mean an additional £7.50 a week on transport, it says.
Osborne has hinted though that he may forego the planned 1p fuel duty rise.
Meanwhile, the impact of inflation on food prices means the average family pays £35.22 more on groceries a month.
"Our Mums' Budget clearly shows that mums are under the financial cosh at the moment. They are being hit hard by the increasing cost of everyday items, particularly utility bills, petrol and food," says Kate Moore, head of savings and investments at Family Investments.
"This is forcing them to cut back on saving, even though they are very concerned about the consequences of doing so," she adds.
Moore hopes the chancellor gives more details about the Junior ISA to encourage families to save:
"The planned launch of the new Junior ISA will be very significant as it's clear that mums up and down the country need a simple, accessible and affordable savings vehicle for their children."
An organisation owned by its members and managed for their benefit rather than the benefit of shareholders. Mutual societies include building societies, industrial and provident societies, such as co-operatives, credit unions and friendly societies. As they don’t have to pay dividends to shareholders, mutual societies generally offer lower mortgage rates and higher savings rates to their customers than banks.
Available from 1 November 2011, the Junior ISA will replace child trust funds (CFTs), which have been phased out. Junior ISAs will have a £3,000 limit and will be offered by high street banks, building societies and other providers that currently offer ISAs to adults. You can invest in either stocks and shares or cash. But, unlike CTFs, there will be no government contributions into each child’s savings pot. Money invested in Junior ISAs will be “locked in” until the child is 18, and the ISA will default to an adult one.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).