October 1, 2022
  • October 1, 2022

This is how families cope with inflation

By on August 7, 2022 0

Research by Te Ara Ahunga Ora, the Pensions Commission, has revealed the various ways households have changed their consumption habits to cope with the rapidly rising cost of living.

First, there are the people who cut luxury spending, delay home renovations, and limit leisure spending.

But the research also highlights the measures of desperation that some families are forced into.

Money Week is the commission’s annual event where it tries to get households to think seriously about their financial lives and make changes for the better.

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It’s usually about getting people to save, make better KiwiSaver choices, get out of debt, and build a budget.

But the cost of living crisis, in which inflation rose faster than wages, prompted the commission to survey more than 1,000 people to see what coping strategies families were adopting.

Households have to make tough choices to balance their budget.  For a large minority, difficult choices mean going without.

Sungmi Kim / Stuff

Households have to make tough choices to balance their budgets. For a large minority, difficult choices mean going without.

Most families are hurting now

Not all families make cuts, but most do.

About 7% of respondents said they were prospering despite inflation.

But out of 100 people surveyed, 53 said they were more careful with money.

Reduce lifestyle expenses

The most common changes in families were in food expenditures.

Supermarket studies show that households lack control over many parts of their spending and see their weekly store as a place where they can save money.

One of the first places people look to cut costs is eating out and socializing.

AIMAN AMERUL MUNER / Stuff

One of the first places people look to cut costs is eating out and socializing.

Out of 100 people surveyed, 45 said they had changed their food shopping habits.

And 44 ate less in restaurants.

Socialization expenditures were closely related. Out of 100 people, 27 said they socialized less. Seventeen said they had canceled subscription services like gym memberships or TV streaming services.

Postponed renovations

The steep rise in the cost of everything in the home means people are delaying home improvement projects, the commission found.

Of 100 people surveyed, 11 said they had suspended renovations

The nature of these renovations was not specified, but it could range from minor projects such as buying a new kitchen or redesigning the terrace to major projects such as adding rooms.

Leave the car at home

Dependence on the automobile has been costly this year.

Gasoline prices hit record highs in May. Fortunately, they have gone down, but they are still high.

Gasoline prices have had a big impact on people's driving habits.  Spending on public transport has increased.

Getty Images

Gasoline prices have had a big impact on people’s driving habits. Spending on public transport has increased.

As a result, people told the commission they were driving less. Out of 100 people, 40 said they had reduced their car use.

Pain and deprivation

Rapid increases in inflation are traumatic for people who are already struggling to make ends meet.

The commission found that 22 out of 100 people felt stressed about their finances, 11 hid their financial situation from others and 19 more frequently ran out of money before payday. Four out of 100 people had taken on more debt. Three out of 100 said they had to move.

Good food is not lacking in supermarkets.  But a large minority of families don't have the money to buy as much as they need.

Alexandre Schimmeck/Unsplash

Good food is not lacking in supermarkets. But a large minority of families don’t have the money to buy as much as they need.

It found that 19 out of 100 people skipped doctor visits and 14 starved themselves more frequently.

Given these challenges, it’s no surprise that 10 in 100 people say the rising cost of living has put a strain on their relationships.

Increase revenue

Only a small proportion had responded by trying to increase their income.

Seven out of 100 respondents said they had changed jobs or taken on a second job. Six said they asked for a raise.

Can these figures be corroborated?

Polls only show what people say they have done.

But many of the answers are echoed in Kiwibank’s latest expense tracker, and the overall picture is similar to that presented in a survey released last week by Financial Markets Authority Te Mana Tātai Hokohoko.

Banks can see what we’re all spending our money on, and Kiwibank makes its findings public every quarter.

The first thing that is clear from his latest expense tracker is that our “actual” expenses are growing more slowly than our “actual” expenses. In other words, we spend more money, but we get less.

“The slower rise in real spending may also suggest that Kiwi is tightening its purse strings,” Kiwibank’s team of economists led by Jarrod Kerr said.

Jarrod Kerr, chief economist at Kiwibank, tracks spending every quarter, and evidence from April, May and June shows households are tightening their belts to cope with the rising cost of living.

PROVIDED

Jarrod Kerr, chief economist at Kiwibank, tracks spending every quarter, and evidence from April, May and June shows households are tightening their belts to cope with the rising cost of living.

“Compared to a year ago, the value of Kiwibank credit card transactions increased by 6.1%,” the Kiwibank report said.

“However, the number of transactions is down 5.2%. Kiwi taps, swipes and inserts his cards fewer times.

Greener, by necessity

Gasoline prices are rising, but gasoline spending is growing less, Kiwibank found.

Kiwibank says its map data showed the number of gas station visits fell 7.5% in the second quarter covering April, May and June.

More and more people are using public transport as the cost of using a car has increased.

Ross Giblin / Stuff

More and more people are using public transport as the cost of using a car has increased.

Spending on public transport has risen sharply, despite the government’s half price reduction on public transport fares.

Yeah, no for home improvement

Kiwibank’s spending data showed a 1.5% drop in housing spending.

Hardware spending decreased by 5%.

The hardest part of town

The majority of families cope with inflation, but some simply cannot without enduring real hardship.

Sam Garaway, chief executive of Christians Against Poverty (CAP), says: “The rising cost of living is causing additional financial hardship for low-income and struggling households..

CAP sees how difficult things are as he works with the poor to help them learn how to budget and get out of debt. This includes negotiating with lenders to cancel or write off debt.

Sam Garaway, chief executive of Christians Against Poverty, says: “People in financial difficulty spend proportionately more of their total income on essential living expenses such as transport, food and housing than the average household.

Provided

Sam Garaway, chief executive of Christians Against Poverty, says: “People in financial difficulty spend proportionately more of their total income on essential living expenses such as transport, food and housing than the average household.

“It takes a lot of ingenuity to manage a family budget with very little money,” says Garaway. “The emotional toll can be heavy as parents and caregivers constantly juggle their dwindling resources to meet the needs of their families.”

“CAP customers describe the stress of driving with an almost empty fuel tank,” he says.

“With the cost of fruits and vegetables increasing by 17%, many are unable to provide their families with nutritious food. For some, this can lead to health complications.

Before the cost of living crisis, two-thirds of people who called CAP were already skipping meals, and three-fifths were disconnecting from family and social events.