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Sun, 5 April 2020

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School’s out for the summer – but what happens to struggling families?

Responsible Finance

3 min read Member content

The summer holidays bring extra financial costs to families, and for those who are already struggling it can lead them to take out exploitative high cost credit. Responsible finance providers help families to smooth fluctuations in their income and expenditure, and can offer a helping hand to struggling families at times of increased expenditure.

Poverty is the strongest statistical predictor of how well a child will perform at school , and in a typical classroom of 30 children, 9 are now living in poverty . Over time, the difference in educational outcomes between pupils from low-income families and more wealthy families have persisted. Recent research from Cardiff University has shown that over the summer holidays, children from low income families are at a higher risk of experiencing hunger, loneliness, social isolation and physical inactivity than their more affluent peers, and are more likely to report poorer mental health and wellbeing on their return to school in the autumn. 
The long summer break can disproportionately set back children from poorer backgrounds. During term time, children from low-income families are often entitled to free school meals, but many struggle to find the money for nutritious food during the summer holidays. At the same time, limited affordable opportunities for school holiday activities and the lack of affordable childcare can also limit young people’s opportunities to take part in social activities. The Family and Childcare Trust reported in its 2018 Holiday Childcare Survey that the average price of holiday childcare is £133 per week; a 4% rise from the previous year . 
Despite funding constraints, there are some fantastic initiatives in local communities that take some of the pressure off parents, providing summer activity and meal programs for children whose parents are struggling. At the same time, responsible finance providers lend to families to help them smooth out fluctuations in their income and expenditure. During the school holidays, responsible finance providers are a vital source of affordable credit and support for families who would otherwise turn to high-cost, exploitative lenders. They help parents to spread the costs of extra childcare, holiday activities and food, helping families to make ends meet. 
In 2018, responsible finance providers lent £26 million in 45,900 personal loans, helping their customers to pay for special and unexpected events, bills, existing debts and for emergencies. They offer their customers a significant cost-saving compared to high-cost credit providers, alongside wraparound support and advice. 
Despite the sector’s strong growth trajectory, the potential of the market is considerable and demand often outstrips supply. Personal lending responsible finance providers need access to patient capital and investment to enable them to scale. Many responsible finance providers are investing in product innovation and embracing Open Banking and FinTech to improve customer experience and enhance affordability checks. The government’s £2 million Affordable Credit Challenge Fund is an exciting opportunity, and we urge FinTechs to partner with responsible finance providers to explore the potential of new technologies.
At the same time, we must make sure that everyone in our country has a decent standard of living. Structural reform and initiatives are needed to stop the disparity in experiences between children from different income levels. In-work poverty has been rising faster than employment, with most of the increase among working parents. Reforms in social security, housing and the jobs market are needed so that children don’t have to grow up in poverty .


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