Adults ‘overestimating their financial knowledge’

Many people in the UK don’t understand common financial products and terminology, despite believing they’re clued up on the subject. 

According to a survey by Pay.UK, 78% of UK adults consider themselves to be financially literate. 

But 71% didn’t know how a savings account works. 

Just 32% of those who are confident in their financial literacy were able to correctly calculate compound interest on £1,000 invested at a 5% annual rate. 

Meanwhile, 29% of these people couldn’t explain what a savings account is, and 35% weren’t able to define an ISA. 

However, the survey highlighted more than an inability to define and explain certain terms. 

A staggering one in five people who view themselves as financially literate were found to run out of money every month. 

Why are so many people mistakenly believing they’re knowledgeable about financial matters, but fall apart as soon as they’re asked to back it up? 

And why are people who feel confident about their financial knowledge running out of money so regularly? 

Well, a lack of education seems to be a big problem – and only a minority are doing anything about it. 

According to the Pay.UK study, just 30% of Brits have proactively taken steps to learn about financial terms outside school. 

And that’s despite 23% of respondents admitting that managing money makes them feel stressed. 

So imagine what difference it would make if more people had the financial support and information they need at their fingertips. 

John Dentry, product owner at Pay.UK, said: “In a challenging economic environment, it is more important than ever to ensure that people across the UK have access to the education and resources so they can feel more assured about managing their finances effectively.”