Spending patterns of couple families

Related terms:
spending, life stage, couples, couple families, big ticket items, large purchases, housing, food, transport, recreation, buying, expenditure, income, households

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INTRODUCTION

There are some commonly, but not universally, experienced life stages in the journey through adulthood. Key transition points include living alone as a young adult, partnering, raising young children, living with adult children, becoming an empty nest couple, and then living alone as an older person. Depending upon the stage of life people are at, their priorities for how they spend their money can change.

This article focuses on five selected types of households considered representative of particular stages in the lives of couple families. These types of households account for 36% of all Australian households in 2009-10 and they illustrate how spending patterns change as a household matures. The household types are:

• young couple only households (a couple whose reference person is aged under 35 years)
• a couple with one or more children whose eldest child is aged under 5 years
• a couple with one or more children whose eldest child is aged between 5 and 14 years
• a couple with only non-dependent children
• older couple only households (a couple whose reference person is aged 65 years or older)

Comparing the different spending patterns associated with these particular life stages of couple families provides some insight into the impact on household spending of changes such as having children, paying off a home mortgage, children growing older then leaving home, and retirement.

Similar changes often affect the spending patterns of one parent family households and lone person households as they grow older. Considerable income, spending, tax, benefit, and wealth data for these and a range of other household types beyond the scope of this article are available free of charge from the ABS website (from the 'Downloads' tabs of catalogue numbers 6523.0, 6530.0, 6531.0, 6537.0 and 6554.0).

SPENDING BY DIFFERENT HOUSEHOLDS

In 2009–10, Australian households spent, on average, $1,236 per week on goods and services. However, spending varied considerably according to the life course stage of the household. For example, households consisting of a couple without children whose reference person was aged under 35 years spent $1,429 per week on goods and services, whereas couple only households with a reference person aged 65 years or older spent $855.

Of the five types of couple family households analysed in this article, those containing an eldest child aged 5-14 years had the highest weekly spending ($1,670). However, when comparing the spending of different types of households, it can be useful to standardise household size and composition (a process called 'equivalisation'). Couple only households with a reference person aged under 35 years had the highest weekly equivalised spending ($172 more than couples with a 5-14 year old eldest child).


Big ticket items

Among all Australian households in 2009-10, the four largest broad spending groups were housing costs (18% of total spending), food and non-alcoholic beverages (17%), transport (16%) and recreation (13%). These groups have consistently been the largest since 1984. (Endnote 1)They were also the largest for each of the selected categories of couple households, although spending patterns were quite different for couples at various stages of their life. For example, reflecting differences in housing tenure, housing costs accounted for 25% of the spending of young couple only households but just 11% of the spending of older couple only households.

Changes in the items available to buy and the level of income will alter the spending patterns of households, and therefore the proportion of their spending on these items. Electrical and computing equipment households may have bought in 2009-10 did not exist in 1984. The homes people live in have also changed: in 1984, 16% of homes in Australia had four or more bedrooms and by 2009-10, this had doubled to 32% (the average number of bedrooms increased from 2.8 to 3.1). Over the same period, the average number of people in a household declined from 2.8 to 2.6.


YOUNG COUPLES

In 2009–10, there were around half a million (502,000) couple only households whose reference person was under 35 years. The average age of the reference person was 28 years. A further 348,000 under 35 year olds were living alone.

Finances

Compared with other Australian households, younger couples had less wealth ($238,000 on average), of which more than a third ($88,900) was equity in their home. However, their weekly disposable income ($1,733) and spending ($1,429) was higher. After equivalisation, their weekly spending was the highest of the five selected types of couple family households examined in this article, and $238 higher than all other Australian households.

The weekly disposable income for young couple households grew by 34% ($437) in real terms between 1984 and 2009-10, one of the lower rates of increase in the selected couple family households.

Housing

For young couples in 2009–10, weekly housing costs ($360 or a quarter (25%) of their total spending) were considerably higher than for other Australian households ($214 or 18%). Unlike couple family households in later stages of their life, very few young couples owned their home without a mortgage (1%). Close to half of all young couples owned their home with a mortgage (49%), and with 47% renting their home from a private landlord in 2009-10, young couples were more likely than older households to be paying market rate rent to live in their home. It was very uncommon for young couples to be renting low cost social housing (less than 1%).


Spending patterns

The spending patterns of young couples in 2009–10 were different to the spending patterns of young couples in 1984. For example, young couples in 2009–10 devoted a quarter (25%) of their total spending to housing costs compared with only 17% in 1984, and just 5% to buying household furnishings and equipment compared with 11% in 1984.


In real terms, housing costs were nearly twice as high for young couples in 2009–10 ($360 per week) than they were for young couples in 1984 ($194 per week in 2009–10 dollars). In contrast, weekly spending on household furnishings and equipment by young couples in 2009–10 ($66) was nearly half of what it had been by young couples in 1984 ($123).


COUPLES WITH YOUNG CHILDREN

The spending patterns of couples change with the arrival of children. While household disposable income tends to fall, along with spending on particular discretionary items such as eating out, spending increases on other items. In 2009–10, there were around 444,000 households consisting of a couple with children where the eldest was under 5 years of age. On average, there were 3.5 people in these households, and the average age of the reference person was 34.

Finances

As couples have children, one or both parents may decrease the number of hours they work, change their job, or stop paid employment altogether. Partly because fewer members of their household were employed (1.5 compared with 1.8 in young couple households), in 2009-10 their disposable weekly household income ($1,571) was lower than that of young couples without children ($1,733). Their weekly income increased by $618 (in 2009-10 dollars) between 1984 and 2009-10.

However, despite reduced discretionary spending, their total weekly spending ($1,484) was not lower than that of young couples ($1,429), suggesting that when young couples have children there is more pressure on their household budget. Another indication of this is that only around 39% of couples with young children felt they had been able to save money most weeks of the previous year, compared with 53% of young couples.

Housing

In 2009-10, weekly housing costs were just as high for couples with young children ($364 or 25% of total spending) as they were for young couples ($360). In real terms, couples with young children paid twice as much as they did in 1984 ($167). Only 6% of couples with young children owned their home without a mortgage. The majority (59%) were repaying a home mortgage, and 31% were renting their home from a private landlord.


Spending patterns

Spending on items of a more discretionary nature, such as recreation, eating out, alcoholic drinks, and personal care, reduced for couple families with the arrival of children; however, these reductions were offset by increased spending on more basic items such as supermarket food, child care, domestic fuel and power, health insurance, nappies, and children's clothing and footwear.


Couples with only young children aged less than 5 years spent an average of $66 per week on child care in 2009–10. These net out of pocket child care costs, which accounted for 4% of their total spending, understate the weekly value of child care services actually received by couples with young children during 2009–10 ($118). This is because, in addition to their out of pocket expenses of $66 per week, they received taxpayer funded child care assistance worth $52 per week on average during 2009-10. (Endnote 2)

Net child care costs diminish as the children grow older. In 2009-10, other households comprising a couple and their child(ren) spent much less than $66 per week on child care. Those whose eldest child was aged between 5 and 14 spent half as much on child care ($33 per week on average) but considerably more on school fees ($64 per week on average) than those whose eldest child was under 5.

COUPLES WITH AN ELDEST CHILD AGED 5-14 YEARS

In 2009–10, there were around 857,000 couple and child(ren) only households whose eldest child was aged from 5 to 14 years. On average, there were 4.2 people in these households, and the average age of the reference person was 40. With an average of 2.2 children, couples with an eldest child aged 5-14 had a higher food bill than than couples with young child(ren). Their spending on recreation was also higher.

In real terms, couples with an eldest child aged 5-14 years in 2009-10 spent at least double what their 1984 counterparts spent on housing costs, miscellaneous goods and services (which includes education fees), and household services and operation (which includes net child care costs). Their weekly disposable income had increased by 77% ($820) to $1,891 in 2009-10.


Housing

Unlike households at earlier stages of the life course, couples with an eldest child aged between 5-14 years devoted less than 20% of their spending towards meeting housing costs in 2009-10. Indicative of the generally older age of their reference person, around 11% of these households owned their home outright, and only 18% were renting their home from a private landlord.

Spending patterns

There has been some generational change in the spending patterns of couples with an eldest child aged 5-14 years. In 1984, spending on food and non-alcoholic beverages, household furnishings and equipment, clothing and footwear, domestic fuel and power, alcoholic beverages and tobacco products collectively accounted for 42% of the total spending of households at this stage of their life. By 2009-10, spending on these same broad groups had declined to 30% of total spending by couples with an eldest child aged 5-14 years.


COUPLES WITH NON-DEPENDENT CHILDREN

Household spending patterns are quite different to those of young couple family households once all the children have either finished full-time education or turned 25. In 2009–10, there were nearly half a million households consisting of a couple and their non-dependent child(ren) only. The average size of these households was 3.3 people, and the average age of the household reference person was 58.

Finances

These households possessed considerable wealth (close to $1.2 million), partly because half of them owned their home without a mortgage. With an average of 2.2 employed people, the disposable weekly income for couples with non-dependant children was also relatively high ($2,093). In real terms, this was $581 higher than in 1984.

Housing

At this stage of life, housing costs (averaging $173 per week in 2009–10) were much lower than at earlier stages. This reflects the much higher rate of outright home ownership among couples with non-dependent children (51%), as the housing costs of homeowners without a mortgage are comparatively low.

The relatively low proportional spending on housing costs by couples with non-dependent children (6% in 1984 and 11% in 2009–10) reflects the lower actual dollar amounts spent on housing costs due to outright home ownership. It also reflects the relatively high combined income of several adults that enables higher levels of household spending on items other than housing costs, effectively decreasing the proportion of total spending needed to pay housing costs.


Spending patterns

In both 1984 and 2009-10, the three largest areas of spending by couples with non-dependent children were food and drinks, transport and recreation. Possibly due to the spending choices of adult children still living at home, couples with non-dependent children reported higher weekly spending than couples with an eldest child aged 5-14 years on alcoholic beverages ($49 compared with $31) and tobacco products ($20 compared with $11).


OLDER COUPLES

Household spending requirements and preferences change again after children move out of home and a couple approaches or begins retirement from the workforce. Household income and overall spending both decrease, with reduced spending evident in most broad areas of spending. From a position of having high household wealth, many older couples draw on this wealth to help support them as they age.


In 2009–10, there were around 746,000 couple only households whose reference person was aged 65 or older. The average age of their reference person (73) will have influenced their spending levels and patterns.

Finances and housing

There was a real increase of $341 in the weekly disposable income of older couples in the 25 years to 2009-10. On average, these older couples had weekly income of $897 at their disposal in 2009-10 and spent $855 per week. With two in every three older couples relying on government pensions and allowances as their main source of income in 2009-10, their income was much lower than that of younger couples. Nevertheless, they tended to be supported by substantial wealth (around $1.1 million on average). A major reason for this level of wealth, and for their low housing costs ($92 per week representing 11% of their total spending), is that 83% owned their home without a mortgage.

Because a relatively small proportion of households have high wealth and a relatively large proportion of households have low wealth, median wealth (i.e. the middle value of distribution) can be considerably lower than average wealth. This is particularly evident for older couples.

Spending patterns

In 1984, food and non-alcoholic beverages accounted for 24% of the spending of older couples, double the proportion they spent on recreation (12%). In an indication that their standard of living was higher than that of their predecessors, the older couples of 2009–10 spent 19% of their spending on buying food and non-alcoholic beverages (basic, less discretionary items) and 17% on recreation (items of a more discretionary nature). In real terms, the older couples of 2009-10 spent more than the older couples of 1984 on both food and non-alcoholic beverages ($160 per week in 2009-10 compared with $132 per week in 1984) and recreation ($146 per week in 2009-10 compared with $65 per week in 1984).


In 2009–10, older couples spent an average of $66 a week on medical care and health expenses. Because they also received taxpayer funded health benefits worth $381 per week on average, (Endnote 2) the actual value of medical goods and services (e.g. hospital care and pharmaceuticals) they acquired in 2009–10 ($447 per week on average) was much higher than their out of pocket spending.

Compared with older couples in 2009-10, older couples in 1984 spent less than half as much ($28 per week in 2009-10 dollars on average) on medical care and health expenses, and received around a third of the value of government provided health benefits ($128 per week in 2009-10 dollars on average). (Endnote 3) (Endnote 4)


In addition to subsidised health care, many older couples are eligible for pensioner concessions on expenses such as transport fares, council rates and utility bills. In 2009-10, around 6% of couples held one Centrelink / DVA pensioner concession card and a further 64% held two. For this reason, the amount that older couples spend on some non-medical goods and services also understates the value of goods and services that they actually receive.

LOOKING AHEAD

Many factors have the potential to alter the spending patterns and levels for households at any particular stage of life. Changes in levels of disposable income and wealth, different rates of price inflation (or deflation) on house prices and various types of goods and services, and changes to price subsidies and taxes can all have an impact. Demographic and cultural changes, the introduction and adoption of new products and services, and health campaigns encouraging or discouraging consumption of particular items can also affect spending patterns and levels. With all of these factors constantly at play, it is likely that levels and patterns of spending at any given stage of life will continue to change.ADDITIONAL TOPICS

THE DIFFERENT EXPERIENCE OF ONE PARENT FAMILIES As well as changing over the life course because of the effects of ageing and increasing home equity, household spending patterns vary according to a household's income. Households with families at the same stage of life can have different spending patterns if their incomes differ considerably. In 2009-10, households of a lone parent and his or her dependent child(ren) had average weekly disposable income of $847. In comparison, households of a couple and their dependent child(ren) had substantially higher average weekly disposable income ($1,907). The one parent families spent proportionately more on housing costs than the couple families (24% compared with 18%). On the other hand, the one parent families spent proportionately less than the couple families on transport (12% compared with 16%) and miscellaneous goods and services (7% compared with 11%). Miscellaneous goods and services include items such as stationery equipment, selected interest payments, education fees, cash gifts, and donations. Back to top

MAKING COMPARISONS MEANINGFUL Equivalisation To enable comparison of the relative spending of households of different size and composition, spending in this article has sometimes been adjusted or equivalised to take account of these differences. For a lone person household, equivalised spending is equal to the actual spending. For a household containing more than one person, it is an indicator of the level that would be needed by a lone person household to enjoy the same level of economic wellbeing as the household in question. Household spending has been equivalised by using the standard practice of dividing by 1.0 for the first adult in the household, an additional 0.5 for each other person aged 15 years or older living in the household, and a further 0.3 for each child under 15 living in the household. An illustration of the impact of equivalising can be observed when comparing the weekly spending in 2009–10 of people aged under 35 living alone ($869 before and after equivalisation) and couple only households with a reference person under 35 ($1,429 before but $952 after). This takes into account the efficiencies which can occur when there is more than one person in the household. Real income/spending levels To enable comparison of the level of income/spending on goods and services in 1984 and 2009-10, all 1984 values presented in this article have been converted into 2009-10 dollars. In all instances, this conversion was achieved by dividing the actual 1984 value by the All Groups Consumer Price Index number for 1984, and then multiplying by the All Groups Consumer Price Index number for 2009-10. Because this process uniformly adjusts all 1984 values to merely remove the effect of general price inflation (i.e. the generally declining purchasing power of an Australian dollar in Australia) between 1984 and 2009-10, it does not show change in the volume of consumption. Any analysis of change in the volume of consumption of specific goods or services requires the use of a correctly weighted price index comprising only those specific goods or services. Because there can be wide variation in rates of price change on different goods and services (see the Australian Social Trends 2007 article Purchasing power) no link can be assumed between real change in the level of spending on specific goods and/or services and change in the volume of consumption of those same goods and/or services. For presentation and analysis of changes in the volume of household consumption between 1985-86 and 2005-06 see the Australian Social Trends 2007 article Trends in household consumption. Back to top

DATA SOURCES AND DEFINITIONS Data in this article are mainly from the 1984 and 2009-10 ABS Household Expenditure Surveys (HES). A household is a person living alone, or two or more related and/or unrelated people who usually live in the same private dwelling. In the 1984 HES, a household's reference person was the person who member(s) of that household considered to be the 'head' of their household. In the 2009-10 HES, a household's reference person was chosen by applying, to all household members aged 15 years or older, the selection criteria below, in the order listed, until a sole member of the household could be selected. the person with the highest tenure when ranked as follows: owner without a mortgage, owner with a mortgage, renter, other tenure one of the partners in a registered or de facto marriage, with dependent children one of the partners in a registered or de facto marriage, without dependent children a lone parent with dependent children the person with the highest income the eldest person A family is two or more people, one of whom is at least 15 years of age, who are related by blood, marriage (registered or de facto), adoption, step or fostering, and who usually live in the same household. A separate family is formed for each couple, and for each set of parent child relationships where only one parent is present. A couple is two people who usually live in the same household and who are partners in a registered or de facto marriage. Non-dependent children are people aged 15 years or older who live with their parent(s), do not live with a spouse or child(ren) of their own, and are not a full-time student if aged under 25 years. Unless otherwise specified, this article uses average values to summarise differences in the income, spending, and wealth of different households. Spending is the cost, after deducting refunds and reimbursements, of goods and services acquired for private use, whether or not the goods were paid for or consumed. In 2009-10, it includes some items provided free or at reduced cost by employers to employees, or withdrawn from their business for their own household's use. Not all of the financial outlays of households are considered to be 'spending'. For example, income tax payments, the principal component of mortgage repayments, and payments for home improvements such as additions, extensions and renovations are excluded. Other outlays that are classed as investment rather than consumption, such as superannuation contributions, life insurance premiums, annuity or share purchases, fixed term interest bearing deposits, and acquisitions of rare collectibles, are also excluded. The reason for excluding these financial outlays is that the purchase of an asset which tends to appreciate in value over time is regarded as a form of saving rather than spending. Investment assets tend not to be consumed or 'used up', rather they can usually be sold or redeemed to recover the original financial outlay that secured their acquisition. Income tax payments are excluded because income tax is not regarded as a fee for service. There is no correspondence between the amount of income tax a household pays to the Australian government and the value of goods and services it receives in return. Housing costs (current housing costs) pertain only to the dwelling in which the household usually lives, and comprise housing loan interest, rent, repair and maintenance expenses, rates, insurance, water and sewerage charges, body corporate levies, and land tax. The principal component of any housing loan repayment is excluded. Net worth or wealth is the value of a household's assets less the value of its liabilities. Back to top

ENDNOTES

1. Australian Bureau of Statistics, 2011, Household Expenditure Survey, Australia: Summary of Results, 2009-10 (cat. no. 6530.0) <www.abs.gov.au>

2. Australian Bureau of Statistics, 2012, Government Benefits, Taxes and Household Income, Australia, 2009–10 (cat. no. 6537.0) <www.abs.gov.au>

3. Australian Bureau of Statistics, 1987, Household Expenditure Survey, Australia: the Effects of Government Benefits and Taxes on Household Income, 1984 (cat. no. 6537.0) <www.abs.gov.au>

4. Australian Bureau of Statistics, 2013, Consumer Price Index, Australia, March 2013 (cat. no. 6401.0) <www.abs.gov.au>