A couple of weeks ago I wrote about financial education being enshrined in the national curriculum helping all those at school today have a better grasp on their finances.
Well according to a new report by the Money Advice Service (MAS), it can’t come a day too soon. Their report, issued this week, shows a worrying lack of even basic financial understanding, which means people could be getting into all sorts of trouble as they try to manage their money.
The research asked people if they understood the terms and conditions of financial products when they took them out. Now, I can quite understand some people not entirely grasping terms like “compound interest” and “annuity”. But scarily, the research found at least one in three people could not correctly identify the meaning of “budget”.
I may be fairly financially savvy, but at the heart of every single piece of basic financial advice I’ve ever read is to set a budget. Incomings and outgoings are at the very core of how we keep tabs on our money and try not to live outside our means. The thought that so many people don’t know what that is fills me with horror, particularly as so many people are struggling in these straitened times.
Potentially worse, given the awful stories we hear about payday lenders, not only had 15% taken out a payday loan, one in five of this group didn’t think they had to pay the money back. Sat alongside a finding from another of our partners that one in 20 teenagers didn’t realise they had to pay back credit cards and I can’t help thinking we are storing up all sorts of trouble for the future.
And not just the future. The MAS survey found the vast majority (84%) admitted they did not read the full terms and conditions when taking out financial products, often because they misunderstood the basic language. They estimate this could have cost an average of £428 per person in the past year.
I can’t help wondering if there is a correlation with people trying to handle their finances online. Yes, of course, some people manage it very well indeed, but for me, having a piece of paper on which I can check terms and conditions at leisure, and see what I’m signing up to, is key. Online, how many people just tick the box saying they’ve read terms and conditions, when the reality is the opposite. Go on – admit it! We all have, to save scrolling through endless jargon.
This weekend, why not take the time to sit down and read the terms and conditions of something – maybe your credit card, maybe your bank account. And get into a good habit of checking the small print in the future. It could save you lots of money – and potentially considerable heartache – going forward.
To read the full MAS release go to: https://www.moneyadviceservice.org.uk/en/static/media-centre