As the British economy takes a battering and the future of the euro looks less certain than ever, debt is becoming a major issue for households.

People are struggling to make ends meet as the cost of living rises and real-term wages fall.

The problem is so acute that MoneySupermarket.com estimates that 1.7 million grandparents are being pushed into debt because they are bailing out their children and grandchildren financially.

According to the price comparison website, more than half of those who provide assistance to children over the age of 18 are putting their own finances in jeopardy.

In fact, the average amount of unsecured debt held by grandparents and parents stands at £3,513.

Kevin Mountford, head of banking at MoneySupermarket.com said: "Many parents and grandparents who provide monetary help are finding their own financial situation being pushed to the limit."

He claimed that many parents and grandparents were actually taking out finance in order to keep their offspring afloat.

"Taking out additional borrowing to support family members is an honourable thing to do but people need to consider how they will repay the debt," Mr Mountford concluded.

A quarter of grandparents surveyed said they were helping out their grandchildren and almost a third of parents are doing the same.

It seems that the majority of cash from parents and grandparents is being used to help with the general cost of living, which has risen dramatically in the past few years.

The funding of education and helping children clear their debts are other major areas in which parents and grandparents are helping out.

Just this week, the Trades Union Congress claimed that the nation's poorest households were the worst hit by falling levels of disposable income.

The organisation's general secretary Brendan Barber noted that month-on-month people have been getting poorer thanks to the soaring cost of food and utility bills.

Posted by Amy White

The high cost of living is dragging down economic performance in the UK, according to the Trades Union Congress (TUC).

In particular the nation's poor – those most in need of debt management – are being hit the hardest, the organisation claims.

The TUC has claimed that the poorest ten per cent of households saw the cost of living climb by 4.1 per cent in March – eight times faster than average growth in weekly earnings, which rose by just 0.5 per cent during the same period.

As a result, the TUC notes, in real terms, wages fell by 3.6 per cent – the joint-largest fall seen in the past two years.

The main driver of growth in living costs were utility bills. The TUC pointed out that utilities – including gas, electricity, water and fuel – accounted for a quarter of low income families' expenditure.

For wealthier households, the biggest expenditure was travel.

Commenting on the dire economic situation, TUC general secretary Brendan Barber said: "Everyone has been getting poorer month-on-month for the last two years. But poorer families have been hit particularly hard by soaring food costs and utility bills.

"This squeeze on living standards is putting a terrible strain on family incomes and is dragging our economy down too."

Mr Barber claimed that the government needs to rethink its "growth-choking" austerity and avoid making jobs even less secure by overhauling employment law and making it easier for firms to fire workers.

The last time that wage growth was in positive territory, according to the TUC was back in April 2010, when it reached 0.4 per cent.

Lloyds TSB published a report this week showing that disposable income fell by 0.9 per cent in April – making debt consolidation increasingly tricky for individuals trying to pay off an unsecured loan and avoid bankruptcy.

Posted by Amy White

Spending power for the average consumer has taken a hit over the past year, falling by almost £100 since last April.

According to new figures from Lloyds TSB, after inflation was taken into account, spending power continued its decline, dropping by 0.9 per cent in April.

The trend is being driven by subdued income growth, which has dropped to its weakest level since February 2011.

In fact, income growth in the year to April 2012 was just 2.2 per cent, far lower than the rate of inflation, which is nearer 3.5 per cent.

Disposable income is also being undermined by a rise in the cost of essentials – such as food, energy and fuel – which is making the dream of being debt free less likely.

Lloyds TSB has found that 86 per cent of the people it surveyed had noticed an increase in cost of these items during the past 12 months.

Once inflation has been taken into account, spending power has fallen by 0.9 per cent year-on-year.

Patrick Foley, chief economist at Lloyds TSB, said: "Household finances are still under real pressure despite the significant falls in inflation."

Jatin Patel, director of current accounts at the bank, said: "There was little respite for consumers in April and it is clear that a growing number are feeling concerned about the state of the UK's economic situation.

"This will not have been aided by news suggesting that the UK has entered into a double dip recession."

She added that the reduction in disposable income is not as marked as it was at the beginning of 2011, but it was having a significant impact on consumer spending and would do for some time to come.

Pressure on disposable income could be the reason that many people are turning to credit cards and overdraft facilities between pay days.

According to MoneySupermarket.com, 25 per cent of consumers use their credit cards to make ends meet – not least because of the high cost of living.

Posted by Amy White

Many experts have warned about the dangers of building up unpayable debt levels through the use of high-interest payday loans. But the majority of Brits are taking them out do so for everyday purposes, not major purchases.

New research from Which? has revealed 60 per cent have used such loans for such goods as food, nappies and petrol, or basic household bills.

Which? described this situation as "alarming", since it indicates such borrowers are taking on unsustainable credit. Particular problems included 25 per cent being hit with hidden charges and one in five had not paid their loans back on time – incurring more penalties.

In addition to this, 57 per cent were encouraged to take out further loans and 45 per cent rolled over their loans at least once. A third were bombarded with unsolicited mail, phone messages or emails encouraging them to borrow more before they had even signed an agreement.

Which? executive director Richard Lloyd said: "At its worst, this booming £2 billion industry can be seriously bad news for borrowers who are struggling to afford food or pay their bills. People are getting caught up in a debt trap, whacked with high penalty charges, or encouraged to roll over payments and take out more loans at inflated rates."

The organisation has called for stricter regulation of the payday loans industry, but those who already have such borrowing may wish to seek debt consolidation methods to transfer their debt to something with much less interest. 

Responding to the research, director of financial services Consumer Focus Sarah Brooks said the findings were "extremely troubling" and show that the problems consumers face are getting worse than that shown by Consumer Focus's own study in 2010.

She said it should provided further impetus for the Office of Fair Trading – which is currently investigation the payday loans industry – to take action to regulate such credit more tightly.

By James Francis