Average UK household costs £1.8 million over a lifetime

It costs £1.8 million over the course of a lifetime to run a household. And the Basic State Pension is nowhere near enough to pay the bills for most pensioner households.

New research from Prudential shows that the average household costs £29,000 a year to run.

Unsurprisingly, the household costs vary according to age group.

It’s the people in the 30 to 49 age group who have to spend the most – probably due to the costs of bringing up a family.

Household living costs by age group

Source:  Prudential/Office of National Statistics

The figure for 65-74 year olds is perhaps the most striking. Their average annual costs are £25,000 a year. Yet the Basic State Pension currently stands at just £5,728 a year. Even if both members of a couple are eligible for a full State Pension, the household will still only receive £11,456 a year. That leaves a spending deficit of more than £13,000 a year!

Sadly if you’ve already retired there’s not a huge amount you can do to boost your income now. Just make sure you’re claiming all the benefits you’re entitled to. But if you’re younger, you can take steps to ensure that in retirement you’re wealthy enough to spend as much as the average pensioner.

Secret

The secret to boosting your retirement income is to start saving as early as possible and to plan ahead.

And if you’re wondering where to find the cash to save, budgeting could be the answer. If you set clear spending goals for each month and stick to them, you may find that you have more spare cash to save than you thought.

Our MoneyTrack tool could help you budget much more effectively. You can see all your credit and debit card transactions on one page – as well as cheques – and our tool automatically categorises your spending into different areas. So, for example, you can quickly see how much you’ve spent at restaurants or on utility bills.

Then you can set goals for how much you’ll spend on these categories in the future, and you can check every day to see if you’re hitting those targets. Signing up for MoneyTrack really is a great way to get your spending under control. 

You can read more about budgeting in Set a budget and stick to it.

The biggest items

Of course, budgeting isn’t the only thing you can do. It’s also worth looking at other ways to drive down the cost of your biggest bills. Let’s look at where we spend most of our cash.

Source: Prudential/ONS

The figure for ‘Restaurants & hotels’ is interesting. At £2,000 a year, that’s just under 7% of total spending. So, for many households, that looks like an area where some easy cutbacks could be made.

Unsurprisingly, the largest chunk of household spending is on ‘Housing, fuel & power’ – 28%. So it’s really essential that homeowners make the effort to get the best possible deal on their mortgage. If you haven’t remortgaged recently, it may be worth seeing whether you could get a better deal. Or maybe it’s time to lock in to a super-cheap fixed rate mortgage before interest rates inevitably rise.

It’s also well worth reviewing your energy tariff once a year to check you’re on the best deal. If you stick with the same provider for a long period, they’ll almost certainly bump up the price by more than they should.

By driving down the size of your bills, you’ll have more money to save for your old age – perhaps in a Stocks and Shares ISA where you’ll probably achieve the best growth rates for your savings pot.

Remember – when you think about your household costs, don’t just think about what you have to spend in 2013. You need to think about 2043 as well.

• Check out our MoneyTrack tool 

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