How Our Financial Ignorance is Costing Us Millions

30-Sep-2010

Shocking new research from uSwitch.com shows that on average, Britons do not become knowledgeable about personal finance until the age of 27.  16% of those surveyed said that they did not get fully up to speed until the age of 35, and almost 9% claimed to be in their forties by the time they fully understood the financial products and services available in the market.

When respondents to the survey were asked whether they felt that we are financially educated as a nation, only 7% replied in the affirmative.  40% said that we are less money savvy than previous generations, and 70% felt that personal finance is now a lot more complicated than it used to be.  

So are we less well prepared to manage our money now than in the past, or is personal finance just more complicated now than ever before?  Whether one or both of these factors are responsible, it's clear that the UK population is feeling the effects.  New figures from the debt charity, Consumer Credit Counselling Service (CCCS) show that 110,174 people in the UK are now enrolled in debt management programmes through the charity, a 12% increase on the previous year.

So how are Britons learning about money?  81% pick up their personal finance knowledge 'along the way', relying on trial and error to make the right decisions about their finances.  A tiny 4% of respondents learned about money matters from banks, while just 3% more people received a financial education from their parents.  

As well as revealing our current shortcomings in managing our purse strings, the research highlights a widespread anxiety about the longer-term effects on the country's future.  95% of respondents agreed that personal finance should be taught in schools, and 89% stated that it was wrong of the government to postpone plans to add money matters to the school curriculum.  

As credit cards, personal loans and other financial products are available to consumers aged 18 and above, the gap between financial knowledge and credit availability clearly needs addressing.  At the last count, our collective lack of financial education has cost us nearly 250 million GBP in charges and penalties alone, through exceeding overdraft limits, missing repayment deadlines and other personal finance deadly sins.  24% of those charged said that they did not fully understand the terms and conditions of the product.

Ann Robinson, Director of Consumer policy at uSwitch.com says: "Our poor understanding of personal finance is costing us money and now looks to be getting worse with each generation. While our debt is increasing, our knowledge is decreasing - the situation is a ticking time bomb. It's also vital that those who are beyond school age stay on top of this. "

"Taking the time to understand any personal finance product you are signing up to will save you money on interest rates and charges that can catch out the un-savvy consumer. By doing this and keeping an eye on your credit rating, you'll also be better placed to get the best deals on the market on your credit cards and bank account - which could save you over 400 GBP a year."

Click here for the 'Easy Guide to Reading your Credit Card Statement' and avoid those charges.