Public lacks confidence on financial terms
The research asked 1,916 adults to consider whether they were confident they knew the meaning of a range of financial words and phrases relating to areas such pensions, savings and mortgages.
The public is most confident about cash-based financial terms, including the phrase ‘savings account’ – which 92% understand. A little further behind is ‘cash ISA’ (78%) and ‘building society’ (74%). ‘Fixed mortgage’ (72%) was also widely understood.
However, they are less confident about financial terms related to savings and investments, including ‘corporate bonds’ (65%), ‘tracker funds’ (64%) and ‘self-invested personal pension’ (64%). The public is least confident about the term ‘spread betting account’, with 67% not sure what it means.
There are also worrying gaps in the public’s understanding of phrases related to debt. For example, three in ten (30%) do not understand the term ‘fixed/variable APR’, despite it being applicable to major purchases, and featuring in the small print of adverts on a regular basis.
The research also showed significant gaps in understanding between different age groups, with those aged 18-24 far less confident. They only knew about three of the 33 terms asked about, while those who are 55 and over are confident on the meaning of 19 terms. While almost six in ten (59%) of those who are 55 or over are confident of the meaning of ‘tracker mortgage’ this falls to just 15% of those aged 18-24.
The trend is repeated among other financial terms. A case in point is ‘stocks and shares ISA’, which 64% of over-55s are confident about defining, compared to just 30% of under-25s. The only term that reverses the trend is ‘Bitcoin’ where 43% of 18-24s are confident they know what it means against only 24% of over-55s.
Matt Palframan, director of financial services research at YouGov, said: “While adverts and those working in the financial industry use many terms as if they were well-understood, it seems as though much of the public is in the dark about some of these key words and phrases. This gap in knowledge should be a concern for many working in the sector as it is possible potential customers may be put off by what they see as impenetrable language and industry-specific jargon.
“Although the low levels of confidence among young people might be expected in a number of cases, it is still surprising that so few are confident of knowing the meaning of so many terms. With many millennials struggling to get on the housing ladder, unable or unwilling to invest in pensions and not putting away great sums into savings, the financial services sector needs to find ways of engaging with young people – this research would suggest that currently there is a language barrier.”