When Times Are Tough: Tracking Household Spending and Debt Through Diaries - Interim Findings

WWW.IPPR.
ORG
WhenTimesare
Tough
Trackinghouseholdspendinganddebt
throughdiaries– interimfindings
InstituteforPublicPolicyResearch
August2009
©ippr2009
InstituteforPublicPolicyResearch
Challengingideas– Changingpolicy
2 ippr|WhenTimesareTough:Trackinghouseholdspendinganddebtthroughdiaries– interimfindings
Aboutippr
TheInstituteforPublicPolicyResearch(ippr)istheUK’sleadingprogressivethinktank,
producingcutting-edgeresearchandinnovativepolicyideasforajust,democraticand
sustainableworld.
Since1988,wehavebeenattheforefrontofprogressivedebateandpolicymakinginthe
UK.Throughourindependentresearchandanalysiswedefinenewagendasforchangeand
providepracticalsolutionstochallengesacrossthefullrangeofpublicpolicyissues.
WithofficesinbothLondonandNewcastle,weensureouroutlookisasbroad-basedas
possible,whileourGlobalChangeprogrammeextendourpartnershipsandinfluencebeyond
theUK,givingusatrulyworld-classreputationforhighqualityresearch.
ippr,30-32SouthamptonStreet,LondonWC2E7RA.Tel:+44(0)2074706100E:info@ippr.org
www.ippr.org.RegisteredCharityNo.800065
ThispaperwasfirstpublishedinAugust2009.©ippr2009
Aboutthecontributors
ThisbriefingwaswrittenbyDaliaBen-GalimwithTessLanningandcontributionsfromLucia
DuranteandRachelSeal-Jones.
Acknowledgements
TheauthorswouldliketothanktheConsumerSpendingandDebtproject’sfunders,Friends
ProvidentFoundation,andtheadvisorygroup:JimFearnley,MoneyAdviceTrust;Andrea
Finney,PersonalFinanceResearchCentre;MillaGregor,ToynbeeHall;SuzanneHall,Ipsos
MORI;MartynSaville,Which?;DanielleWalkerPalmour,FriendsProvidentFoundation;and
JudithWardle,WardleMcLean.ThanksarealsoduetoKayteLawton,TonyDolphin,Carey
Oppenheim,LisaHarkerandKateStanleyatipprfortheircommentsonthisbriefing.
Finally,abigthankyoutoallthefamilieswhotookpartintheresearchfortheirtimeand
input.
Contents
Introduction......................................................................................................................... 4
Researchmethodology........................................................................................................ 5
Spending,savinganddebt:emergingthemes ................................................................... 7
Conclusion..........................................................................................................................14
References..........................................................................................................................15
Introduction
Thefinancialcrisisandrecessionhavehighlightedtheunsustainablenatureoftheeconomic
growththatwentbefore.Whilethereismuchdiscussionaroundtherecession,global
capitalismandwhatprincipleswillunderpineconomicrecovery,ipprhasbeenexploringthe
particularimpactsonfamiliesaspartofaground-breakingprojectonconsumerspending
anddebt.Throughthisinnovativeresearch– whichlooksathouseholds’circumstancesin
greatdetail– wearegaininganunderstandingofpeople’sdailyexpenditure.
Thisbriefingpresentstheinterimfindingsfromourresearch,undertakenoverfourmonths
withlow-incomefamiliesacrosstheUK,whichaimstoproducein-depthunderstandingof
thedynamicsbetweenspending,savinganddebt.Itprovidesfreshinsightintotheimpactof
therecessiononthedailyrealitiesofpeople’slives.
Thenextstageoftheprojectwillanalysethefindingsinmoredetailtoofferinsightintohow
families–specificallythoseonlowincomes–arecopingintherecession.Itwillalsolookat
thesavingsandassetsagendaandhowpeoplearecopingwithdebt,withpolicy
recommendationspresentedbasedonthisanalysis.
Thisbriefingprovidesanopportunitytoreflectonsomeoftheemergingthemesbeing
generatedfromrichdatacollectionandanalysis.Thefindingshereareillustrative.
Background:changesinconsumption
Consumptionisakeydriverofeconomicgrowthandincreasingconsumptionhasbeena
featureofthesignificantrisesinlivingstandardsintheUKoverrecentdecades.However,
thishascreatedproblemsatthenationalandhouseholdlevel.Outstandinghousehold
debthasmorethandoubledsince2000andhasnowreached£1.4trillion;andtheCitizens
AdviceBureaureportsthatonaverageitsdebtclientsowe£16,971,whichistwothirds
higherthanin2001(Aznar2009).
Changesinconsumptionaffectdifferentsocio-economicgroupsindifferentways.Based
onaminimumincomemeasurethattheJosephRowntreeFoundationhaspublished,the
minimumcostoflivinghasincreasedbyabout5percentoverthelastyearformost
families(Hirschetal 2009).Thisisdisproportionatelyskewed:familiesonlowincomes
spendalargerproportionoftheirhouseholdbudgetsonitemssuchasfood,fueland
publictransport,allofwhichhaveincreasedinprice,thanhigher-incomehouseholds.
Incomeinequalityhasalsogrown(Breweretal2009),withthoseatthebottomofthe
incomescalenotseeingtheirincomesriseasmuchaspeoplefurtherupthescale.Many
householdsarebecomingpoorerandthecombinationofincreasedlevelsofdebt,rising
costsandincomelevelsremainingfixedorfallingpresentssignificantchallenges.
Researchmethodology
ippr’sresearchemployedaninnovativemethodologywherebylow-income1 familieswith
childrenbelowworking-age,locatedinLondon,Newcastle,NottinghamandGlasgow,took
partininterviewsandthencompletedaweeklydiaryforamonth,thusprovidingavery
detailedpictureofspendingandsaving2.Furthermore,byworkingwithfamiliesoverafour-
monthperiod,weareabletolookbeyondaparticularpointintime,andunderstandthe
decisionsthatfamiliesmakearoundspendingandsavinginmoredepth.
Profileofthesample
Thesamplewaspurposivelyselectedtoincludemenandwomen,arangeofhouseholdsizes
andtypes,ethnicityandemploymentstatus.
• Therewere34two-parenthouseholds,22withoneparent,andtwofamilieslivingin
extendedhouseholds(withfamilyorfriends).
• Thefamilieshavebetweenoneandfivedependentchildren.
• Theparticipantswerelargelyfemale.Forty-fiveheadsofhousehold(self-selectedto
answerthequestionsonfamilyfinances),werefemale.Theageoftheparticipants
rangedfrom21to50yearsold.Therewere14respondentsagedbetween21and30
yearsold,19aged31to40and25were41to50.
• FiftyhouseholdswerewhiteBritish,fourwereBritishAsian,tworespondentswere
mixedrace(WestIndian/WhiteBritish)andtwowerenon-UK-nationals,bothfrom
SriLanka.
• Reflectingtheprevalenceofcarersandthedisabledamonglow-incomehouseholds
andbenefitclaimantsintheUK,16ofthehouseholdsincludedsomeonewitha
disability.
• 22households(16ofthemcouples)hadmortgages.Twosinglemothersandone
coupleownedtheirhouseoutright.Ofthe33renters,15hadtheirrentpaidby
housingbenefits(11ofthemsinglemothers).
Duringthecourseoftheproject,theemploymentstatuschangedinseveralhouseholds,
creatingfluctuationsinlevelsofincomeandexpenditure.Thiscapturesthesometimesfluid
natureofemploymentformanyfamilies–particularlyinarecession.
• Atthestartoftheproject,thereweretenhouseholdswithtwoadultsin
employment,29householdswithoneadultinemploymentand17householdswith
noemployedadult.Additionally,twoparticipantslivedwithextendedfamily,and
therewereatleasttwoworkingadultsinboththesehouseholds.Onesinglemother
livedwithfriendsandonecouple.
• Bytheendoftheresearchperiod(fourmonthslater)manychangeshadoccurred
includinginemploymentstatusinsomecases,andinhoursworked.Forexample,
oneparticipant,asinglemother,becameunemployedandmovedinwithherpartner;
acoupleofparticipantslosttheirbusinessesandbecameunemployed;andseveral
hadtheirhoursreducedbytheiremployers.
1.Abroaddefinitionoflow-incomewasusedtoreflectarangeofhouseholds.Theselectioncriteriawere
basedonameasureofequivalisedincome(forexample,acoupleandonechild:£226perweekorlessand
£11,752peryearorless).Othercriteriasuchashouseholdsize,ethnicityandemploymentstatuswerealso
considered.
2.PrimaryresearchwasundertakenbetweenDecember2008andMay2009with58low-incomefamiliesin
Glasgow,London,NewcastleandNottingham.Face-to-faceinterviewswereconductedbetweenDecember
andJanuary.Familieswerethenaskedtocompleteaweeklydiaryforamonth.BetweenFebruaryandMay,
researcherscontactedparticipantsatregularintervalstounderstandwhethertherehadbeenanysignificant
changestoincomeand/orexpenditure.FinalinterviewswereundertakeninAprilandMaywith52families.
Sixfamiliesdidnotcompletetheresearch,buttherearedatafromtheearlystages.
Thesamplewasalsopurposivelyselectedtoexposethediversityofincomeamonglow-
incomefamilies.Thisrangehasallowedforcomparisonacrossdifferentsocialandeconomic
circumstances.Overathirdofthefamiliesinthissamplewerelivingbeloworjustabovethe
povertyline(Figures1and2).3
Figure1: £1,400
Household
weeklyincome £1,200
beforehousing
costs(BHC) £1,000
£800
£600
£400
£200
£0
Equivalised weekly income BHC Poverty line BHC Median income BHC
£900
Figure2:
Household
£800
weeklyincome
afterhousing £700
costs(AHC)
£600
£500
£400
£300
£200
£100
£0
Equivalised weekly income AHC Median income AHC Poverty line AHC
NotetoFigures1and2:Thedataforsevenhouseholdswereincompleteandarethereforenotincluded.
Thedatawereequivalisedbeforeandafterhousingcosts,usingtheMcClementsEquivalenceScalethat
appliesaweighttoeachhouseholdmember,allowingforcomparisonbetweenhouseholds.Povertyline
andmedianincome2007/2008levelsfromHouseholdsBelowAverageIncome(DWP2009)
Thegraphsshowhouseholdequivalisedincomeforfamiliesbeforeandafterhousingagainst
themedianincomelevelsandthepovertyline.Inbothgraphs,aboutaquarteroffamilies
werelivingbelowthepovertyline,withapproximately80percentlivingbelowthemedian
incomelevels.
3.Duringtheprojectitbecameclearthattwoofthesehouseholdsfelloutsidetheinitialcriteriafor
participation,withrelativelyhighratiosofhouseholdincometothenumberofpeopleinthehouseholds.
Oneoftheselosttheonlysourceofhouseholdincometowardstheendoftheprojectandbothadultsin
thesecondhouseholdwerebeingthreatenedwithredundancy.Bothhouseholdswereuncertainhowthey
wouldcoveroutgoings.
Spending,savinganddebt:emergingthemes
Whiletheanalysisisongoing,ourinterimfindingshighlightthedifferentwaysinwhich
peoplebudget,save,spend,earnandprioritise.Theyillustratethedynamicsofeachofthese
inthecontextofhouseholdfinancesandthewaythatdifferentfamiliesplan,copeand
respondtochanges.
Belowweoutlineourfindingsinrelationto:
•Planningahead –howfamiliesplanforeventsandhowtheycopewhenthereare
unforeseenandunexpectedincreasesinexpenditureordecreasesinincome
•Managingbudgets–methodsthathouseholdsusetomanagetightbudgets
• Saving –someofthewaysthathouseholdssaveandsomeofthemainbarriersto
short-termandlonger-termsaving
•Borrowinganddebt –attitudesandmethodstowardsborrowinganddebt.
Planningahead
Manyfamiliesreportedthattheyfeltlessfinanciallysecurecomparedwiththesametimelast
yearandareconcernedabouttheirfuturefinancialstabilityasunemploymentcontinuesto
rise.
Allofthehouseholdsinthisresearchwereparticularlyvulnerabletochangestotheir
financialsituation,includinganticipatedchangesthatcouldbeplannedforsuchas
additionalspendingatChristmasandbirthdays,andlessforeseeablechangessuchasjob
losses.Somehouseholdsseemedtofeelprotectedbytheirlevelofincomebutasthey
becamemorevulnerabletheyfoundplanningmoredifficult.Somefamiliesweremorefearful
thanothersaboutfuturespendingdemandsandfelttheywouldbeunabletocopewithany
additionalexpenditure.
Inparticular,Christmasandsummerholidayswereacknowledgedasbeingdifficulttimesof
theyearbecauseoftheirassociatedexpense.Buttheamountthatfamiliesspenton
Christmasvariedenormouslyandwasonlylooselycorrelatedwithlevelsofincome.Certainly
manyfamiliesstruggledthroughtheChristmasperiodanditseemedtocauseincreased
levelsofstressandanxiety.
‘Christmasis…justanotherbill…Mybrotherandsisterareverygoodto
them[mychildren],theybought[mydaughter]ticketstoabigshowlastyear
thatcostnearly£50,somethingIcouldn’tdo…Imeanmypoordaughter,I’ve
barelyevenboughtherastitch,shehasallhand-me-downsfromherfriends,
herwardrobes[are]fullofNextbuttheyarenothingthatI’vebought,’causeI
couldn’taffordto.’(Male,Newcastle,two-parenthousehold,twochildren)
Thewintermonthsbringadditionalfinancialpressuresduetoincreasedcostsforelectricity
andgas,whichdisproportionatelyaffectlow-incomefamiliesasahigherproportionof
householdbudgetsarespentonutilities:
‘Thistimeofyear…it’scolder,yourelectricsaredearer.You’vegotyourgas
centralheatingonalotmore,youtendtobuyinmorefood,comfortfood,all
thesekindsofthings.’(Female,49,Glasgow,one-parenthousehold,three
children)
Livingontightbudgets,withlimitedsavingsanddisposableincomemakesunexpected
shocks–suchasthebreakdownofahouseholditem,divorce,illness,anaccidentorsudden
jobloss–allthemoredistressing.
Figure3illustratesthesituationofafamilyinGlasgowwheretheonlyearnerwasmade
redundantjustastheresearchbegan.Themortgagewascoveredbyinsurance,butthe
household’sfinancialsituationdeterioratedoverthecourseoftheproject.Thecouplewere
gettingintodebttocoverthebasiccostofliving.Severalmonthsafterbecoming
unemployedtheirbanktoldthemtheywerenolongerentitledtoanoverdraftandtheyhad
topayitback.Theyhadreliedontheoverdrafttojugglepaymentpriorities,andwere
concernedtheywouldnotmeethouseholdexpenses.Thefamilywasspendingaslightly
higherproportionoftheirincomeondebt(excludingmortgagepayments)thanonfood.
Figure3:
Couplewith 120 % Other
threechildren, Total income
unemployed, £1,917
100 % Food
Glasgow Other 17
7 Insurance payments
Expenditureas 80 %
8
apercentageof 8 Debt repayment
income, 60 % 7
November– 7
Electricity
December2008 40 %
50 Gas
20 %
Mortgage and
0 second secured loan
Managingbudgets
Manylow-incomefamilieshavetomanageverytightbudgets.Theexamplebelow(Figure4)
presentstheincomeandexpenditureofasinglemotherwithonechild,notcurrentlyin
employment.Hermonthlyincometotalledabout£480.Increasesinlivingcostswerethe
mostdifficulttobudgetforandabsorb:shetoldushowfoodandfuelcostswere
increasinglyeatingintoherbudget.Tocope,shehadbegunshoppingaroundmoreand
reducingcostsinotherareas.Shefoundthatshewasabletoprioritiseandbudgetto
accommodaterisingcostsduetothestabilityofherincomefrombenefits.Assheknew
exactlyhowmuchmoneywascomingineachweekandherhousingwascoveredby
HousingBenefit,shewasabletospendwithinhermeans.Shedidnotwantaccessto
mainstreamcredit,butpreferredtoborrowfromfamilyorfromtheSocialFund–a
Governmentfundtowhichpeoplecanapplyforhelpinemergencies.
Figure4:Single
mother,aged 120 %
Total income Other
24,onechild, £486.18
London 100 % Council tax
a)Expenditure Other 17
Public transport
asapercentage 80 % 5
ofincome, 6
6 Telephone/
November– 60 % 8 internet
December2008 8 Clothing/shoes
40 % 16 Electricity
Gas
20 %
31
Food
0
Figure4:Single
mother,aged £160
24,onechild, £140
London £120
b)Expenditure £100
asapercentage
£80
ofincome,
November– £60
December2008 £40
£20
£0
16.11.08 23.11.08 30.11.08 07.12.08
date
Income Expenditure
Thecopingmechanismsthathouseholdsemploytomanagetheirbudgetsvary.Livingwithin
one’smeanshasbeenfoundtobeamechanisminitselfforfamilieslivingonlowincomes
(Hillsetal2006).Increasesinprices–particularlyfoodandutilities–aswelltheimpactof
therecessionmeantthatmanyfamiliesinourresearchwerepragmaticaboutonlybuying
whattheycouldafford.Manytalkedaboutsacrificingcertainluxurieslikesocialising,
holidaysandentertainmentfortheirchildren.Andmanyfamiliescomparedtheircurrent
situationwiththepast,whentheyconsideredthemselvestohaveabetterlifestyle:
‘Youknow[before]wewereabletodoweeluxuries,takethekidstothe
cinema,getthetrainintoGlasgowandgoforaMcDonalds...’(Female38,
Glasgow,two-parenthousehold,threechildren)
Managingwithaverytightbudgethasanemotionalimpactonfamilies,withmanyfeeling
guiltyaboutdeprivingtheirchildren,particularlyaroundChristmastime:
‘We’renotgoingtothecinemaanymore.WetendtorentaDVDandwe
don’tgomadoranythingbutwe’llhaveabagofchips.We’rejustnot
spendthrifts,wedon’tgooutdrinking.Christmaswillbeverytight,it’smy
grandson’sfirstChristmasandI’mfeelingveryguiltythatIcan’tspendwhatI
wanttospendonhim.’(Male,42,Nottingham,two-parenthousehold,two
children)
Thereisastrongevidencebasehighlightinghowparentsonlowincomesprioritisetheir
children’sneedsevenasincomelevelsfall(Bennett2008).Inparticular,mothersinlow-
incomehouseholdsoftenusesophisticatedbudgetingplanstomaximisetheirmoney.
Amongippr’sparticipants,themajorityoffinancesweremanagedbywomen(althoughin
somecasesfinancesweremanagedbythemalepartnerorboth).Thisiscommonaswomen
areoftenresponsibleforthemanagementofhouseholdfinances(Goodeetal1998).Many
familieshadalsochangedtheirbehaviourinordertobudgetmoreeffectively.Doingmore
cookingfromscratch,shoppingaroundforcheaperdealsandchangingenergysuppliers
wereallexamplesofhowsavingswerebeingmade.
Manyparticipantswerewellawareoftheirweeklyandoftendailyincomeandexpenditure:
‘IgetmymoneyeveryWednesdayincashfromthepostoffice.Sotheincome
supportandthechildbenefitbothgoin,andthenIgoanddrawitalloutin
onelump.AndthenIjustsitdownanddividemymoney.Igostraighttothe
supermarketanddomyshoppingsothatcomesfirst…andthenIputpetrol
inonthewayhome…AndthenIgetsomemoneyandputthatinmy
children’sbuildingsociety,soItakethat£5outandthenIgetmytithesout
whichI[give]tothechurch…whateverisleftisminetospend’(laughs).
(Female,43,Nottingham,one-parenthousehold,threechildren)
Despitethesetechniquestomanagetightbudgets,andcopingmechanismstolimitthe
impact,somefamiliesfellbehindonpaymentsforbills,rentanddebt.
Asanexample,duringtheperiodcoveredbythediaryresearch,expenditureinone
householdinNottingham(byacouplewithtwochildren)was158percentoftheirincome
(Figure5).AsignificantproportionofthiswasaccountedforbyChristmasspending,but
expenditurecontinuedtoexceedincomefromJanuary,largelyduetohighhousingcostsand
otherlong-termdebtcommitments.Theirlackofabilitytomeetcommitmentswas
exacerbatedwhenthemainearner’sbusinessalmostcollapsedoverJanuaryandFebruary.
Thecouplewereusingcreditcardstomeetcostsbutthesituationcametoaheadin
Februarywhenagraduateloanwascalledin.ThecouplesoughthelpfromNational
Debtline,andnegotiatedaconsolidationloan.Theyweretoldtheiraccesstomainstream
creditwouldbelimitedforatleastsixyears.Again,theirdebtrepaymentswerehigherthan
expenditureonfoodandgiventhatChristmasshoppingtookalmostaquarterofthe
householdbudget,theirsituationwasworrying.
Figure5:
Couple,bothin 180 %
Total
work,two Other
160 % income
children, 17 % £2,167 Council tax
Nottingham 140 % 9
9 Car running costs
a)Expenditure 120 % 13
asapercentage 13 Childcare
100 %
ofincome, 15
November– 80 % Food
December2008 26 Debt repayments
60 %
40 % Xmas shopping
55 Mortgage/rent incl
20 %
arrears
0
b)Expenditure
andincome,
£1400
November–
December2008 £1200
£1000
£800
£600
£400
£200
0
Week 1 Week 2 Week 3 Week 4
Income Expenditure
Thisexampleillustratesthevulnerabilityofmanyhouseholdsandthedifficultiesthatmany
faceinprioritisingandjugglingdebts.Havingtoprioritisewithlimitedcashflowcanmean
havingtomovemoneyaround,delayingadditionalpaymentsandinteresttopaymore
pressingones.Ofcourse,peopleprioritiseindifferentways.
‘Iprioritisethings,Ipaywhatneedstobepaid,andifIcangetawaywith
leavingsomeforacoupleofdaysthenthat’showIdealwithit.Ialwaysseem
tohavetojuggleitabout,youknow,robPetertopayPaul…mybillsalways
getpaid.Idon’thaveanyoutstandingapartfromyourcreditcardandcarand
thingslikethat,butyouknow,Ijustprioritisewhatisamustandthendeal
withtherestasitcomes.’(Female,38,Glasgow,two-parenthousehold,three
children)
Inadditiontooftenmanagingtightbudgets,low-incomefamiliesoftenpaya‘poverty
premium’formanyessentialandnon-essentialitems(SavetheChildrenandFamilyWelfare
Association2007).Itwascommontousepre-paymentelectricitymeters,catalogue
shoppinganddoor-steplenders–allofwhicharemoreexpensivecomparedwithotherways
ofgettingthesamegoodorservice.Whilesomeconsumersvaluetheflexibilityassociated
withmakingregularandsmallpayments(see,forexample,Kempsonetal 2009),manydo
nothaveachoice.Anumberofhouseholdsinourstudytoldusabouthavingtopaymore
foressentialandnon-essentialitems:
‘I’vehadtoorderit…youhavetopayabitmoreforit…it’sonly£200in
theshops,nowIamhavingtopay£300…it’stheonlywayIcanaffordto
payforit.’(Female28,Newcastle,two-parenthousehold,threechildren)
Saving
Thedifficultiesfacedbyhouseholdslivingonlowincomes–bothanticipatedand
unanticipated–notonlyimpactonhowtheyprioritisespendingandtheirvulnerabilityto
debt,butalsoontheirabilitytosave.Despitepositiveattitudestowardswantingtosave,
thereisoftensimplynotenoughmoneytodothat.
DatapresentedbytheNationalSavingsandInvestmentsagency4 showsthattheideal
amountthatpeoplewanttosaverepresentsover15percentoftotalincome.However,not
surprisingly,thereisashortfallbetweenidealsavingswhichamountto£210.26permonth
onaverage,andactualsavingsat£90.12permonth(NS&I2009).Althoughthelattermarks
anincreasefrom£85.34inautumn2008,regularsavers(currently47percentofallsavers)
savesignificantlymorethanaverage(ibid).Astherecessioncontinuestobefeltinthereal
economy,despitepeople’saspirationtosave,manyarelessableto.
Onthewhole,thefamiliesweinterviewedwantedtosavebutmanysimplycouldnotasthey
wereonlyjustlivingwithintheirmeans.Alargeproportionofhouseholdsspokeabouthow
theyweremoreabletosaveinthepast.Savingoftenmeansmakingasacrificesomewhere
elseinthebudget.Familiesspokeaboutnotbeingabletospendanymoneyonsocialisingin
ordertosaveforspecificthingslikebirthdaysorChristmas.
‘That’showelseI’venoticedthatthingshavegotworsebecauseIalwayshad
£10-£20inthebankbeforewhenIwasreallyskintwhichiswhymumdidnot
havetosendusanything.Butnow,Ihaveneverevergotanythinginthat
savingsaccount,never.Ithinkit’sgot£1orsomethinginit.Idon’tthink
anythinghasgoneinformonths,simplybecauseIcannotaffordtoleaveit
there.’(Female,28,Newcastle,two-parenthousehold,twochildren)
4.TheNS&Iquarterlysummarydisaggregatesdatarelatingtosavingsandsavingsaspirationsacross
variousdemographicindicators.Theseincludelocation,gender,andagegroupbutnotsocio-economic
grouporfinancialposition.
‘Ihavenevermanagedtosaveapennyinmylife[but]welivewithinour
means…’(Female,47,two-parenthousehold,threechildren)
Despitethelackofsavingcapacity,somehouseholdsarebetteratsavingthanothers.Some
participantssavedevenifitwasaverysmallamount.Manysaidtheytrytopassthese
savinghabitsontotheirchildrenandasignificantproportionofchildreninthesamplehave
savingsaccounts.
‘Iguessit’sahabit…youneverknowwhenyoumightneeditso[wesave]
sowehavealittle.’(Female,32,Newcastle,two-parenthousehold,three
children)
Veryfewofthehouseholdsparticipatinginthisresearchdidnotsaveatallandevenfewer
expressednodesiretosave.Savingdidnotnecessarilycorrelatewithlevelsofincome,but
theabilitytosaveregularlywasinterruptedbychangesinincome.
Throughouttheresearchitbecameclearthattherearedifferentgoalsandunderstandings
aboutsavings.Householdsweremostinclinedtosaveforaparticularitemorevent.The
mostcommontargetspeoplesavedtowardswereChristmas,birthdays,holidaysandhome
improvements.However,twothirdsfoundtheycouldnotalwayssaveenoughtocoverthe
costs.Moneysavedwasoftenusedinsteadtocoverunforeseenexpenses,mostcommonly
repairsofhouseholdappliancessuchaswashingmachinesandfridge-freezers.
‘Wejusttrytosaveforaholiday,putalittlebitextraawayeachmonthifwe
cansowe’vegotsomethingtowardsaholidaybutitdoesn’talwaysworkout
thatway.’(Female,46,two-parenthousehold,Newcastle,twochildren)
Fewerpeoplewereinclinedorabletosavefora‘rainyday’oranemergencyandveryfew
participantsspokeaboutsavingforthefuture.Andtherewasvirtuallynoreferencetolong-
termsavingssuchasforpensions.
Notsurprisinglythereissomehostilityandlackoftrusttowardsbanks–particularlyas
guarantorsofsavings.Otherfinancialinstitutionsareviewedmorepositively,suchascredit
unions5 (particularlyinthecaseofparticipantsfromGlasgow)andlocalsavingschemes.A
householdinNottinghamwaspartofasavingsclubwhereoneneighbourwouldguard
savingsforeveryoneandreleasethemoneyatChristmas.
Knowingandtrustingthepeoplewhoworkinthecreditunionorrunthesavingsschemeis
seentobeimportant.Thesecharacteristics–anorganisationbeingtrustedasunderstanding
people’scircumstancesandithavingalocalpresence–arekeyinconsideringthewaythat
financialproductsshouldbemadeaccessibletorespondtodifferentfamilies’needs.
Borrowinganddebt
Throughouttheresearchperiod,manyfamilieshadtoborrowmoneyand/orwereinsome
kindofdebt.Attitudestoborrowinganddebtvaried.Therearemixedviewsaboutborrowing
fromfamilyandfriends.Participantswhodidthispreferredtheinformalnatureofit–which
includedbeingabletomakeflexiblepaymentsandoftenwithlowornointerest.Someof
thehouseholdsintheresearchdescribedthemselvesasbeingexcludedfrommainstream
creditsourcesandtherewasgeneralscepticismtowardslargerbanks.
‘SomedaysIhavenomoneyleftandIamlike,“whatamIgoingtodo?”and
that’swhenIgoaroundandseemydadandhehastohelpme…’(Female,
24,London,one-parenthousehold,onechild)
5.Creditunionsarefinancialcooperativesownedandcontrolledbytheirmembers–seetheAssociation
forBritishCreditUnionsLtdatwww.abcul.org/page/about/intro.cfm
Despiteapreferenceforinformalborrowing,someofthehouseholdsdiduseformalcredit.
Butasdiscussedearlier,manylow-incomefamiliesmayonlyhaveaccesstohigh-interest
credit,whichincursa‘povertypremium’.TheGovernment’sSocialFund(seeabove)was
popularamongafewparticipantsbecausethereisnointerestcharged.Butmanypeopleare
unawareoftheoptionsavailable,andtheSocialFundcantakesometimetobeadministered
andprocessed.
Levelsandtypesofdebtvariedbetweenfamilies.Somewereusingformalborrowingaspart
oftheirday-to-daybudget,othersaccessedcredittodealwithemergencies,whileothers
werecompletelyagainsthavinganyformofdebt,nomatterthecircumstances.
‘We’vegotaloanandIhavemycard…mystorecardsarepaidoffeach
month.’(Female,46,two-parenthousehold,Newcastle,twochildren)
‘No–wenevergetintodebt,that’sonethingthatwe’vealwayssaidthat
we’llneverdo.’(Female,21,two-parenthousehold,London,onechild)
Conclusion
ippr’sconsumerspendinganddebtresearchisgeneratingnewevidencearoundthe
dynamicsofspending,savingandconsumptionpatternsforlow-incomefamilies.Itcomesat
atimewhereincreasesinenergyandfoodpriceshavehitlow-incomefamiliesthehardest
andtheimpactoftherecessionisbeingfeltasunemploymentincreases.Manyhouseholds
arefindingitdifficulttoplanahead–particularlygiventheirvulnerabilitytochangesin
incomeandexpenditure.Anditisclearthatmanyfamiliesarefacingsignificantchallenges–
theconsequencesofwhicharenotonlyfinancialbutalsoontheiroverallwell-being.
Thenextstageoftheresearchwillprovidemoreinsightintothedailyrealitiesofpeople’s
livesandhowtheirspending,savingandconsumptionareadaptingandchangingin
responsetothedifferenteconomicclimate.Thefocuswillbeon:
•Gainingabetterunderstandingofwhysomefamiliesarenotabletosaveandthe
relationshiptopovertyandotherinequalities
•Understandingattitudestowardssavings,spendinganddebtandhowfamiliescope
withdebt
•Analysinghowconsumptionpatternsmaychangeineconomicrecoveryandwhat
typeofconsumerculturemayemerge
•Unpackingthedifferencesbetweenthewaypeoplesavefortheshortandlonger
term.
References
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BennettF(2008)‘Howlow-incomefamiliesusetheirmoney’,inStrelitzJandListerR(eds)Why
moneymatters:familyincome,povertyandchildren’slivesLondon:SavetheChildren:115-24
BrewerM,MurielA,PhillipsDandSibietaL(2009)PovertyandInequalityintheUK:2009 London:
InstituteforFiscalStudies,availableatwww.ifs.org.uk/comms/c109.pdf
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DWP.Availableathttp://research.dwp.gov.uk/asd/hbai/hbai2008/pdf_files/
first_release_0708.pdf
GoodeJ,CallenderCandListerR(1998)Purseorwallet?Genderinequalitiesandincomedistribution
withinfamiliesonbenefits London:PolicyStudiesInstitute
HillsJ,SmithiesRandMcKnightA(2006)Trackingincome:Howworkingfamilies’incomesvary
throughtheyear CASEpaper32,LondonCASE,availableat
http://sticerd.lse.ac.uk/dps/case/cr/CASEreport32.pdf
HirschD,DavisAandSmithN(2009)AminimumincomestandardforBritainin2009York:Joseph
RowntreeFoundation,availableatwww.jrf.org.uk/sites/files/jrf/minimum-income-standard-
2009-full.pdf
KempsonE,EllisonA,WhyleyCandJonesPA(2009)Isanot-for-profithomecreditbusinessfeasible?
York:JosephRowntreeFoundation,availableatwww.jrf.org
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When Times Are Tough: Tracking Household Spending and Debt Through Diaries - Interim Findings

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