Money eh? We could all do with a bit more of it and, at the same time, we could probably all do without the hassle of it.
No matter where we go or what we do, we need money to be able to get by in life – from the small things right up to life changing purchases such as buying a house.
But, while we all have to use money every day, do we actually know what we’re doing? Families across the UK have an average unsecured debt of more than £13,000 – but are they confident enough to manage their money without this being a big problem?
A worrying picture of confusion when it comes to finance
NS&I conducted a survey to try to understand whether or not Brits fully understood the terms used by their banks and building societies.
It found that:
- One third of Brits don’t know what a BACS payment is and only 38 per cent know what AER means
- Only about a half of people surveyed (53 per cent) knew what ISA stood for
- One in ten admit to guessing what a term means when they don’t know
The Mirror also reported some worrying findings from a study conducted by MoneySupermarket about credit cards, which are a big part of the growing debt levels for UK households.
Among its findings were that:
- Two thirds of credit card holders say they don’t understand how their cards work
- One in ten people don’t know how much interest they pay
- One in five respondents said they didn’t know how to check their credit report
All these point to worrying gaps in knowledge for large parts of the population. With basics such as this missing, it seems unlikely that large parts of the population would be able to get around complex pension arrangement or understand what a SIPP investment is. This raises fears for the future, as the Government tries to get to grips with how best to fund an ageing population.
UK lags behind when it comes to financial literacy
Yet, is it any wonder that we struggle with these issues as a nation when, according to the Organisation for Economic Cooperation and Development (OECD), we are below average at teaching financial literacy?
The OECD found that the UK ranked 15th out of 30 countries for this, below Estonia and Latvia and concepts such as inflation and calculating interest were not well understood by Brits.
It certainly thinks more can be done in the education system to address this, stating: “Schools can also assist children and young people in developing the skills and attitudes that will help them to achieve financial wellbeing, and encourage positive habits and behaviours such as making spending plans, saving and planning ahead.”
A problem on the horizon
The combination of a lack of knowledge and high household debt should be a cause for concern. Indeed, the debt alone has caused consternation for the governor of the Bank of England.
It seems that families aren’t fully aware of what they need to know when it comes to money. Better education – to children and adults – is clearly needed when it comes to the practical knowledge you need to manage your finances.