WITH rent, interest rates and cost-of-living skyrocketing, many parents and carers are struggling.
A new survey conducted by The Children’s Society in the UK found that one in 10 parents and carers run out of money by the end of the month, while more than half of young people said they were worried about the amount of money their family have.
The report about the impact of the cost-of-living crisis on families focused on the first half of 2023.
Why are parents and carers running out of money by the end of the month?
There are a lot of reason why parents and carers are running out of money each month, but one major contributing factor is the cost-of-living crisis.
Rajan Lakhani, a money expert at smart money app Plum, said inflation is still making the cost of everyday items much more expensive than they were last year, and families are not always able to cut down their spending, especially on essential items.
“Parents and carers also have less flex in their schedule to work more or get a more well-paid job, and are more likely to work part-time or have a reduced income due to parental leave,” said Lakhani.
“Also, with the base rate running at 5.25%, housing costs have risen substantially for many people. Homeowners with young families are likely to be vulnerable to increases in mortgage rates, as they often extend themselves to buy a home that accommodates their family and are therefore likely to have a higher LTV [loan-to-value ratio].
“And they are less flexible, with downsizing or moving to a cheaper area often not an option. Families who rent are vulnerable to increases too, especially as their payments have risen by record-breaking amounts.”
Another huge cost for parents and carers is childcare, which takes up a growing percentage of their take-home salary.
What should the priorities be?
It’s worth talking to your children about money, so there is some level of transparency in the home.
“Families across the country are facing tough decisions about how and where they spend their money at the moment, and it’s a topic that most people don’t like to talk about, even with loved ones,” said Maxine McCreadie, a personal debt expert at Creditfix.
“Avoiding communicating about financial pressures can only lead to increased anxiety and can even cause resentment further down the line, so it’s important that parents don’t ignore money worries and hope they’ll go away.
“Parents will be able to work out how much they want to share with their kids, but if you can start to communicate about how things are in your household, it can help make talking about money feel a bit more normal.”
But prioritising where money will be spent and distributed can also help parents see what they are really working with.
“Rising costs mean that families are having to make really difficult decisions about where their disposable income goes. Obviously the first priority should always be mortgage or rent payments and other essential spending like food, energy and travel costs,” said McCreadie.
“Once these essentials are covered, it’s important to prioritise clearing any debts like credit cards or loans, starting with those on the highest interest rates. If you feel that your debts are becoming unmanageable it’s important to seek debt advice as early as possible.” What is the best way to budget?
Some people swear by a spreadsheet, but you can definitely budget well without one. You don’t even need a pen and paper as these days you can use an app to view all your accounts in one place.
“The important thing is that you find a method that works well for you; you can have the best spreadsheet in the world, but if you don’t look at it, it’s pointless,” said Lakhani.
Next, make sure you prioritise paying off any outstanding debt. This is particularly important in a high interest-rate environment, as this will become a heavier burden over time.
Then, create a spending budget for the upcoming month. Being honest with yourself about your spending is the most important thing here, so you can accurately map the amount you’re likely to spend.
Finally, make sure you have at least a small amount left over each month and put it away in a separate account, ideally earning a decent interest rate. Save for an emergency fund first, so you’re covered in case anything unexpected happens. Then split the savings into different pots, depending on what you will need it for. Setting a saving goal can really help with motivation, too.”
What else can parents do to have more streams of income?
In this economy, finding other ways to make money is crucial.
“Finding more streams of income is a real challenge when you have family commitments. There are only so many hours in the day to work! If you do have some time, though, there are some income streams to explore,” said Lakhani.
“Completing surveys, for example, is a relatively easy way to earn a bit extra on the side and can be done online from home. You could also sell old clothes or homemade items on sites like Vinted, Depop or Ebay.”
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What supports are there to help with rise in the cost of living? More in this section
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