New report shows why you need £1.3m to run a home

THE average household costs £1.3 million to run over the course of a lifetime, a new report has revealed.

The Family Spending Report by Prudential showed that transport was the most expensive annual expenditure at £3,492 a year and £212,158 over a lifetime – allegedly topping even housing costs.

Those aged 30 to 49 found their expenses to be the highest at £30,170 a year, chiefly because of the cost of supporting dependent children.

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Housing – including mortgage payments and fuel and energy combined – costs an average household £3,292 annually, and a total of £204,408 over a lifetime.

But a large part of household income is spent on “non-essential” items such as socialising and eating out.

Recreation and culture is the second-largest expense for an average household at £3,323 a year, and restaurants and hotels also remain a top expenditure for most people – at £2,064 a year, with the cost of alcoholic drinks, tobacco and drugs coming in at £624.

Financial experts warned that while current households have had money in their pockets to spend on leisure and recreation, future generations may not be able to dig as deep, as the recession continues to put pressure on household finances.

“What we have seen over the past few years is that while inflation has been running high, in the same period average incomes have remained flat,” said Paul Crayston, spokesman for the Money Advice Trust Scotland.

“That is set to continue over the next six or seven years and what this means is that doing things like putting food on the table, or heating your home, or travelling to work take more of your income than before.”

He added: “Obviously, these are lifetime figures and the nature of the economy in the future is difficult to predict.

“However, costs for categories such as communications, which is currently coming in at £692 a year – and £42,948 over a lifetime – will likely be much higher in the future if you consider that a family of four, all with iPhones, for example, are probably spending £100 a month on their phones alone.”

The report found that costs for pensioners, although lower than those for younger generations, stand at an average of £20,368 a year for a family where the head of the household is aged between 65 and 74. That leaves a gulf of more than £10,000 between the basic state pension of £10,310 and the average expenditure.

The figure drops to £14,175 for those aged 75 and above.

Vince Smith Hughes, retirement expert at Prudential, said: “Although living costs do fall as people reach the latter stages of their lives, the average household costs are nowhere near covered by the state pension, even in two-pensioner households.

“Planning ahead for retirement is an important part of being able to meet everyday living costs, as well as the much steeper costs which may occur later on in life, such as healthcare.

“Saving as much money as possible from as early as possible in your working life is a key part of helping to ensure you’ll get the income you need to live a comfortable retirement.”

The two least expensive costs for UK households are education and health, mainly because many of these services are provided by the state.

The average UK household spends £364 a year on education, and £343 on healthcare.

The cost for these two services combined stands at £43,917 over the course of a lifetime.