Families focus on finances as household costs rise
Expected increases to household costs are putting extra pressure on already stretched parents. As we celebrate the International Day of Families 2022, we look at how families are doing their best to prepare for a stronger financial future.
When it comes to financial wellbeing, parents are feeling the pain. In Intrum’s 2021 European Consumer Payment Report, half of the parents surveyed said that worry about rising bills is having a negative effect on their general wellbeing – that’s more than those in households without children (40 per cent).
And this is the tip of the iceberg when it comes to the discrepancy. Parents are more likely to report that their bills are rising faster than their income and that they need to request longer payment terms to keep afloat than their peers without children. They’re also more likely to worry about affording a comfortable retirement and being able to save enough for the future.
Rising household costs threaten family finances
The situation for consumers is set to worsen as household costs rise. With energy prices rocketing, Euro area annual inflation was 7.4 per cent in March 2022, up from 5.9 per cent in February.
According to a March 2022 YouGov survey of seven European economies, the cost of living is rising across the board. The cost of energy is most concerning to Europeans, the survey said, with 92 per cent of those questioned in Italy and Spain worried about this. Even the countries least worried, (Denmark and Sweden) had high percentages concerned (63 per cent and 58 per cent respectively).
Consumers in all seven countries expect their cost of living will continue to increase in the next twelve months.
Meanwhile, Intrum’s survey found that parents are feeling under pressure to spend money they don’t have on their children. Almost half (47 per cent) have borrowed money or maxed out their credit card to do so.
Parents are preparing for the future
However, the good news is that parents are also using their experiences in the pandemic to reassess their financial knowledge and skills, teaching their children about money.
- Almost a third of the parents we surveyed see the pandemic as an opportunity to start improving their finances. They want to be in a better position to withstand future financial shocks
- Since the pandemic, parents are scoring more highly than non-parents when it comes to making long-term savings plans, setting targets to manage their bills, discussing strategies to manage their debt, putting aside extra money and consolidating their finances.
- It's heartening that parents are taking time to help their children understand financial terms and the principles of financial management – 57 per cent said they are more likely to do this now than pre-Covid and 56 per cent are putting aside money as a safety net for their children.
Financial knowledge requires context
However, this comes with a caveat, as six in ten say they are advising their children not to take on debt. It’s important that the nuances around different types and uses of debt are explained.
Used properly, debt is an important tool for life and business. Debt allows families to take on home ownership and fuels entrepreneurship, driving our economy. It’s important parents are sufficiently financially aware to help their children understand the differences between this and getting into debt because of poor financial management.
Download the full report
The insights from this article is based on the European Consumer Payment Report 2021. You can download the full report from below.