Widening income gap ‘leaves some families in debt trouble’

A growing income gap is going to leave some consumers struggling financially.

The latest Family Finances report from Aviva shows in the last three years, there has been a 14 per cent increase in the difference between the highest and lowest earning families in the UK.

If this situation continues to develop, people could rack up significant debts and may not be in a position to properly manage them. Indeed, 56 per cent of families have admitted they are concerned about the knock-on effect of an increase in basic living costs.

However, one positive from the report is that Britons are reining in their spending in an effort to gain better control of their financial situation. Some six per cent of family units have sacrificed their monthly spending on holidays, while five per cent are cutting back on leisure goods and four per cent no longer buy clothing and footwear every month.

These decisions should bear fruit in the long run, as it means consumers will have that extra bit of money during the month, which can be used to either clear debts or save for a rainy day.

Louise Colley, protection distribution director for Aviva, said: "The cost of living is uppermost in many people's minds this winter. Growing incomes mean some families will be starting the new year in a better financial position than they have become accustomed to in the last three years. 

"But sadly the widening gap between the 'haves' and 'have-nots' means this cheery outlook will not be shared by all. On the whole, family savings are not built to withstand long-term pressure on living costs."

She added all families should be looking to take steps to protect their futures, as it means they will be prepared for any unforeseen circumstances, such as an unexpected bill landing at their door.

By Amy White