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Debt and the Growing Cost of Raising Children


Debt and the Growing Cost of Raising Children

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Child Poverty Action Group (CPAG) released a report this week which demonstrated that the cost of raising a child to the age of 18 had risen once again. They argue that this is due to government austerity policies, and that it will only add to child poverty, and debt levels.

The Cost of Raising a Child

The ‘Cost of a Child in 2017’ Report details the costs of raising a child to the age of 18 under a number of different circumstances. Excluding factors such as housing, childcare and council tax, raising a child in a ‘no frills living standard’, accounting for food, clothing, heating, birthday presents and a week’s self-catering holiday in the UK, would cost a couple £75,436. For a single parent, this rises to £102,627.

These bare essentials were decided through in-depth discussions with members of the public, and the report notes that ‘years of austerity have reduced public expectations of what constitutes essential spending’.

Including housing, childcare and council tax, the estimate rises to a shocking £155,142 for couples, and £187,120 for single parents.

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This means that a couple earning the National Living Wage falls 13% short of being able to afford raising their child, a single parent falls 18% short, and, a single parent on maximum benefits is lacking a terrifying 31%.

Even those on the national median wage are struggling. A single parent on the UK’s median wage earns 14% less than the minimum they need to support their child, and a couple living on the UK’s median wage are only just getting by, as they earn just 8% more than the bare essentials necessary to raise a child.

As the chief executive of CPAG, Alison Garnham, said ‘The result is a yawning gap between what ordinary families need for a no-fills living standard and what they actually have. And the shortfall will grow if inflation rises further, with damaging consequences for children’

Why is this happening?

CPAG argue that higher inflation and a freeze on state benefit are squeezing our finances, so that low income parents are unable to meet the basic needs of raising a child.

Costs are up 4% since 2016, particularly for public and private transport. Last week, the ONS announced that price rises are outstripping wages, due to the costs of importing with a weakened pound.

At the same time, child benefit and child tax credit rates have not increased since 2015, child tax credit entitlement has been limited to only two children per family, and benefits have been capped.

It is estimated that, due to these changes to child tax credit entitlement, first-born children born after 6th April 2017 have lost an extra £10.45 per week, which is 12% of the cost of raising them. Similarly, now that only the first two children are entitled to child tax credits at all, third or subsequent children have lost as much as £53.20 per week, which is 59% of the cost of their basic needs.

The report even argues that the introduction of the National Living Wage has not helped the situation as it should have. The resulting 4% increase in the statutory minimum pay level has mostly gone to reduced tax credits, which are means tests, and inflation.

The author of the report, Donald Hirsh, Director of the Centre for Research in Social Policy at Loughborough University says ‘For the first time in post-war history, these cost increases are not being matched by increases in support given to families from the state’. He predicts the problem will just become worse

Garnham adds ‘Our research shows that the benefit freeze will mean that children will be the main losers with the return of inflation’. The Department for Work and Pensions’ latest figures suggest that 20% of children are now living below the poverty line, an increase on 2016.

The report concludes that families in these tough situations have few options. They can undergo serious hardship, rely on family, or get into debt. Unfortunately, not everyone has family they can financially rely on, and all this contributes to the UK’s ongoing debt crisis.

Debt and the Cost of a Child

Here at Creditfix, we are very aware of the relationship between childcare and debt. A huge number of cases that we deal with every year tell us that they just wanted to be able to provide for their child, or have been struggling since becoming a single parent.

In a recent Creditfix survey of people struggling with their debts, 31.58% of respondents believed that the rising cost of living was the main reason for their debt, the single largest response. 7.9% of respondents specifically cited costs associated with children as the main reason for their debt.

Similarly, in a survey of those in debt and parental leave, 80.48% of respondents believed that they were not paid enough during their leave to cover their costs of living, and 56.81% of respondents believed that having children caused them to go into debt. Only 25.12% of respondents reported receiving child maintenance allowance during their parental leave.

This demonstrates a problem with our child benefits, welfare support system, and inflation, which is leading to more and more people to need IVAs or Trust Deeds, just in order to survive.

If you need more information about the options available to you in dealing with your debt, you can always speak confidentially with one of our friendly advisors on 0808 2085 198.

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