Household costs rise seven times faster than income

Increasing transport and utility prices have seen the cost of living rise seven times faster than income in the average household since 2011.

The most recent Family Finances report from insurance company Aviva shows that net income for the average family has increased by just 3%, or £60, since November 2011 to hit £2,043 this month.

However, monthly expenditure has increased 22% over the same time period from £1,488 to £1,819.

The cost of living has far outstripped inflation, which stood at 2.7% in October 2012. Transport costs have been the biggest offender, with the average price of rail fares increasing by 5.9% in January 2012 combined with 4.96% inflation on travel expenses – the average family is spending £341 more each year to cover travel costs.

Families are also struggling with price rises in leisure goods, furniture, food, and utilities.

Source: Aviva Family Finances report January 2013

Despite rising costs, families are making an effort to get their finances in order by paying down debt and saving more.

Debt repayments have increased by an average of £20 a month as families cut back on non-essential spending.

‘While family incomes have risen slightly, the impact of inflation and price rises from transport and utilities suppliers means that few families will enjoy the benefits of extra ‘disposable’ income to spend on luxury items. In the interests of building a stable foundation for their future, it is encouraging to see that these growing expenses have not prevented families increasing their debt repayments or savings,’ said Louise Colley, head of protection sales and marketing at Aviva.

Savings up

Savings are at their highest point since the report launched in January 2011 with average savings sitting at £1,277, up from £967 in November 2011.

The highest level of monthly savings since the report began was also recorded, with the average family saving £80 a month.