Britain’s shocking lack of financial sense revealed
Do you know your AER from your APR? Do you feel confident enough to ask for an explanation when faced with financial jargon? For a lot of people, the answer would appear to be ‘no’.
We recently asked over 1,000 people from across the UK about their financial knowledge and budgeting abilities and have revealed the extent of the UK’s confusion when it comes to managing personal finances.
- 82% of us are regularly confused by financial jargon
- 54% feel too embarrassed to ask for simple explanations to financial jargon
- 25% of us think an IFA is a football association, not an Independent Financial Advisor
- 26% of us don’t know what APR is
- 20% of us admit they don't know how to budget and save money
The feedback revealed some unsettling gaps. According to the survey, 82% of respondents feel confused by financial jargon, despite tighter regulations around presenting facts in a clear, easy-to-understand way. The study also revealed over half of those asked felt too embarrassed to request simple explanations for key financial information. Perhaps as a result, over 25% didn’t understand what APR (Annual Percentage Rate) was in a financial context.
When asked if they knew how to budget and save, 20% of respondents admitted ‘no’. We also asked about unsecured debt (e.g. credit cards and loans), with 20% claiming they ‘did not know’ what percentage of their monthly salary they spent on this kind of debt.
On the subject of financial jargon, only 50% were able to correctly link the letters IFA with independent financial advice. 25% suggested it was a football governing body, 20% were unsure and 5% took a punt on it being a beer.
Satsuma Commercial Director, Tim Anson, said: “This study suggests an alarming number of people might be making important financial choices without having a clear understanding of the key facts. As a lender, the idea of customers feeling too embarrassed to ask for a straightforward explanation is a huge concern.
Tim Anson also commented: “If more than 20% of respondents are admitting they don’t know how to budget and save, the nation obviously has an issue around basic financial management. I’m concerned over 25% of those surveyed didn’t understand what APR is and more than 60% didn’t know how it’s calculated. At Satsuma, we try to set out our facts and information in a simple, jargon-free way (see our Understanding APR guide). As an industry, however, it’s obvious we need to do a lot more.”