Past relationships are increasingly helping families to manage their money, but there is a worrying number of families failing to protect their lifestyles, according to a new report.
The Aviva Family Finances Report 2013, which tracks the financial circumstances of different UK family types, reveals nearly half of adults who live as a modern family (49%) have experienced at least one previous committed relationship prior to their current set-up.
More than one in three marriages (34%) in the UK is a remarriage for at least one partner; while almost a third of two-parent UK families (30%) include one or more children from a previous relationship.
One in three families with children from past relationships receive financial support from an ex-partner. This includes 23% who get a regular income and 10% who receive occasional payments. Regular monthly payments range from less than £50 a child to more than £1,500, averaging out at £254 a child, per month.
A third of those who receive financial support rely on it to make ends meet, while 38% would need to make major cutbacks to manage without this income.
Louise Colley of Aviva said: "It is encouraging to see that experience helps many families to fine-tune their approach to money matters and take a more harmonious approach. However, like many things in life, relationship circumstances can change, which makes it vital for families to keep track of their finances and ensure any existing commitments are kept up to date."
Child support goes unprotected
Only one in four (24%) know for sure that their former partner has financial protection, such as life insurance, income protection or critical illness cover, in place. Almost one in five (18%) know their ex-partner has no financial protection, while another 30% fear this may be the case.
Any change in family circumstances has a significant impact on financial arrangements, with one in five (19%) failing to bring their financial affairs up to date so wills are often neglected.
On a positive note, Aviva reveals that those in a new family set-up end up in a more comfortable financially and are less prone to argue about money.
Gap widens between the highest and lowest earning families
Aviva's report also reveals UK families are divided by a growing income gap, despite their typical incomes reaching a three-year high.
UK families earned a monthly income of £2,166 in December 2013 – the highest figure since Aviva's report began in 2011. Couples with one child have gained the most over the past three years, with their monthly incomes growing by 18% (£357) to £2,321 in December 2013. These gains are in stark contrast to divorced, separated and widowed parents who have seen their monthly incomes fall by 14% over the same period to £1,189.
While the overall picture has improved, the gap between the highest and lowest earning families has grown by 14% in the past three years to £1,459 in December 2013.
A record number of UK families now have some form of savings to fall back on, with just one in five (20%) having no savings at all. However, the margins for comfort are getting smaller, with 30% of UK families putting less than £500 away in December 2013. Between January and December 2013, the number of people with less than £2,000 put away has jumped from 28% to 40%.
Savings accounts have fallen out of favour over the past year and families are looking beyond Isas for better returns. The uptake of Isas has dropped from 41% in July to 39% in December 2013. More families invested in premium bonds in December 2013 (21% compared with 17% in January 2013) as well as stocks and shares (17%, compared with 13% in January).
Colley of Aviva added: "Taking steps to save for the future and protect the family income can make all the difference if costs increase or unexpected bills land. It is great news that more people have some form of savings they can turn to, but many people's savings pots are little more than a one-off emergency fund. On the whole, family savings are not built to withstand long-term pressure on living costs."