Leading think tank, the Institute for Public Policy Research (IPPR), has called on the government to support recession-hit families’ efforts to save for their children’s future.
New IPPR research shows that although many low-income families want to save money, they are struggling because increases in the price of necessities like fuel and food, and rising unemployment have disproportionately affected low-income families. The research analysed the behaviour of low-income families in London, Newcastle, Nottingham and Glasgow, looking at how the recession has changed the spending, saving and borrowing habits of families.
Key IPPR findings
IPPR’s spending and debt research shows:
- Many families are using community-based and informal approaches to saving, as a result of hostility towards and a lack of trust in the banks – particularly as guarantors of savings. The research has found that knowing and trusting the people who worked in the credit union or run the savings scheme is seen to be an important factor for the families.
- Many families feel less financially secure compared with the same time last year and are concerned about their future financial stability.
- Families prioritise their children’s needs – often using sophisticated budgeting and coping strategies – to make sure that their children are not going without.
IPPR critical of Conservative child trust fund plans
The IPPR report argues that at a time when the next Government will be looking to make savings in public expenditure, initiatives to encourage families to save must be expanded not cut. The IPPR singled out the Conservative plan to cut back the child trust fund (CTF) scheme in particular, so only the poorest third of families and disabled children would get one in future. This would mean that children in families with an annual household income of below £18,000 would no longer have this asset.
IPPR’s research suggests that families in all income groups are making active use of their CTF, including low income families, 30% of whom add monthly to their child’s CTF.
Kate Stanley, Programme Director at IPPR said: ‘Our research shows that parents want to save for their children’s future. The child trust fund offers a way for parents to know that their children have some savings – and it may be the only way to ensure all children have a stake in society when they enter adulthood.
‘Conservative Party proposals to cut the child trust fund so that only the poorest one third of families and disabled children get one in future is entirely inconsistent with George Osborne saying at every stage the Conservatives will support a culture of savings.
‘Our research shows that families on low and modest incomes consider saving for their children very important but really struggle to do so.’
Which? debt expert Martyn Saville commented: ‘Which? welcomes this new research into how low-income families have coped with the economic downturn. At a time when public confidence in mainstream financial institutions is still at rock-bottom, it’s vital for banks to treat all customers fairly, especially those struggling with rising costs and uncertain or low incomes.
‘This report shows how resourceful consumers are having to be in the recession and how far financial providers still have to go to restore their shattered reputations.’
Which? debt advice
Individuals struggling with debts should seek independent, free debt advice directly from organisations such as the Consumer Credit Counselling Service (0800 138 1111), National Debtline (0808 808 4000) or their local Citizens Advice Bureau (number in the phone book).
Consumers should avoid commercial debt management companies – why pay for a service that is available better and free elsewhere?
For more detail, see the Which? guide to dealing with debt.
To find the best child trust fund for your son or daughter’s savings, visit Which? Best Buy child trust fund reviews and read our guide to how child trust funds work.
To join the Which? campaign for better banks, visit our Britain Needs Better Banks website and register your support for the campaign.
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