Annual Report 2006‚Äď2007

Financial wellbeing of families

This section presents preliminary results of research using data from Waves 1 and 2, conducted by Matthew Gray and Jennifer Baxter.

This section analyses how the financial wellbeing of the families in Growing Up in Australia changed between Wave 1 and 2, and examines the association between relationship breakdown and changes in financial wellbeing. The analysis is restricted to families who responded to both waves, and information from both cohorts of study children are combined.

Use was made of two measures: the self-reported prosperity of families and whether financial hardships have been experienced in the previous year. Prosperity was measured using responses to the question: "Given your current needs and financial responsibilities, how would you say you and your family are getting on?" Response categories ranged from very poor through to prosperous. The bottom two categories (very poor and poor) were combined, as were the top two (very comfortable and prosperous). This question was asked of the primary carer of the study child.

To assess the extent to which families experienced financial hardship, information was used on whether primary carers reported that, due to shortage of money, they had any of the following happen: adults or children went without meals; they were unable to heat or cool their home; they pawned or sold something; or they sought assistance from a welfare or community organisation.

Between Wave 1 and Wave 2, there was an increase in perceived prosperity (Figure 9). For example, the proportion of respondents saying their family was very comfortable or prosperous increased from 17 per cent in Wave 1 to 24 per cent in Wave 2. The proportion saying they were just getting along decreased from 34 per cent to 25 per cent.

Figure 9 - Perceived prosperity 2004 (Wave 1) and 2006 (Wave 2)

Figure 9

Source: Growing Up in Australia, Waves 1 and 2

Consistent with the improvement in prosperity, the proportion of families reporting having experienced a financial hardship fell from 13 to 7 per cent between Waves 1 and 2. Of those who experienced financial hardships, most families reported experiencing just one hardship. At each wave, the two most common hardships were having pawned or sold something (7 per cent at Wave 1 and 3 per cent at Wave 2) and having sought assistance from a welfare or community organisation (6 per cent at Wave 1 and 4 per cent at Wave 2).

There is a clear relationship between perceived prosperity and the experience of financial hardships, with very few families who described their financial prosperity as being reasonably comfortable or better experiencing financial hardships. Among the families just getting along, 24 per cent had experienced one or more financial hardships in the previous year. Not surprisingly, the poor or very poor families were most likely to have experienced financial hardships - 64 per cent at Wave 1 and 45 per cent at Wave 2.

The extent to which families saw changes in their perceived prosperity and the experience of financial hardships between 2004 (Wave 1) and 2006 (Wave 2) is shown in Table 6.

Table 6 - Perceived prosperity, changes from 2004 (Wave 1) to 2006 (Wave 2)

Perceived prosperity 2004 (Wave 1) Perceived prosperity 2006 (Wave 2) Number of observations
Very comfortable or prosperous Reasonably comfortable Just getting along Poor or very poor
% % % %
Very comfortable or prosperous
60
32
7
1
1,589
Reasonably comfortable
24
60
16
1
4,189
Just getting along
8
44
45
3
2,952
Poor or very poor
5
25
52
19
273
Total
24
48
25
2
9,003

Source: Growing Up in Australia, Waves 1 and 2

There was substantial change in self-reported financial prosperity between Wave 1 and Wave 2. For example, of those who said that their family was very comfortable or prosperous in Wave 1, 60 per cent also said that their family was very comfortable or prosperous in Wave 2, 32 per cent were reasonably comfortable, 7 per cent were just getting along and 1 per cent were poor or very poor. Of those who were poor or very poor in Wave 1, just 19 per cent said they were also poor or very poor in Wave 2. The remaining 81 per cent said that their families' level of prosperity had improved, with 52 per cent saying they were just getting along at the time of the Wave 2 interview, 25 per cent reasonably comfortable and 5 per cent very comfortable or prosperous by Wave 2.

The extent to which families experienced changes in the number of financial hardships between 2004 (Wave 1) and 2006 (Wave 2) is shown in Table 7. Families who experienced no financial hardships at Wave 1 were very unlikely to experience financial hardships at Wave 2. However, many of those who experienced financial hardships at Wave 1 did not at Wave 2, although those who had experienced two or more hardships at Wave 1 were more likely than those who had fewer hardships at Wave 1 to experience at least one financial hardship at Wave 2.

Table 7 - Experiences of financial hardship, changes from 2004 (Wave 1) to 2006 (Wave 2)

2004 (Wave 1) 2006 (Wave 2) Number of observations
No hardships One hardship Two or more hardships
% % %
No hardships
97
3
1
7,824
One hardship
78
17
5
776
Two or more hardships
51
30
19
331
Total
93
5
2
8,931

Source: Growing Up in Australia, Waves 1 and 2

While the experience of financial hardship at any point in time may have adverse consequences, the negative effects are likely to be more severe for families that experience financial hardships for a sustained period of time. Analysis of the data suggests that the number of families experiencing financial hardships at both Wave 1 and 2 is less than 5 per cent, much lower than the 17 per cent who reported having experienced one or more financial hardships in either Wave 1 or Wave 2.

Financial wellbeing and relationship changes

Although on average financial wellbeing improved, within some families there was a decline. One possible reason for decline in prosperity is the breakdown of couple relationships, as single parents are more likely to experience financial hardship than couples (Figure 10).

Figure 10 - Financial wellbeing by family types, 2004 (Wave 1) to 2006 (Wave 2)

Figure 10

Source: Growing Up in Australia, Waves 1 and 2

Families who experienced a relationship breakdown between Waves 1 and 2 reported lower prosperity, and were more likely to have experienced financial hardships at Wave 1 than the couple families who remained together (Table 8). For families that were a couple family in both Wave 1 and 2 the proportion saying that they were just getting along or worse fell from 35 to 23 per cent, and the proportion having experienced a financial hardship fell from 11 to 4 per cent. For couple families that separated between Waves 1 and 2, the proportion that said that they were just getting along or worse increased from 49 to 53 per cent. Although the proportion who reported experiencing a financial hardship fell slightly (26 to 24 per cent), the fall was smaller than for couple families who did not separate.

The financial wellbeing of families that were single-parent families at both Wave 1 and 2 improved quite significantly between Waves 1 and 2, particularly with respect to the experience of financial hardships. This analysis suggests that the biggest improvements in financial wellbeing were reported by parents who were a single parent at Wave 1 but who were a couple family at Wave 2.

Table 8 - Changes in family type and financial wellbeing, 2004 (Wave 1) to 2006 (Wave 2)

  Just getting along or worse Experienced a financial hardship Number of observations
At Wave 1 At Wave 2 At Wave 1 At Wave 2
% % % %
Couple in both waves
35
23
11
4
7,695
Became single in Wave 2
49
53
26
24
386
Became partnered in Wave 2
55
42
35
18
157
Single in both waves
57
50
37
22
774
Total
38
28
15
7
9,012

Source: Growing Up in Australia, Waves 1 and 2

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