Almost a third of the UK population admit to signing a financial contract without fully understanding the terminology, according to figures released yesterday (19 July).
A report from Reboot Online Digital Marketing Agency, which analysed YouGov’s survey of 1,916 British adults on their understanding of financial words and phrases, showed “spread betting account” to be the most problematic financial phrase with 67 per cent unsure of its meaning.
More than half of the survey participants (65 per cent) were unclear of the phrase "corporate bond" and 58 per cent do not fully understand the term “shared equity mortgage” and 57 per cent were unsure on the meaning of a "offset mortgage”.
The report found that according to research by Norton Finance, 31 per cent of the British public have admitted signing a financial contract without understanding some or all of the terminology included.
Source: Reboot Online Digital Marketing Agency
Comparatively, Reboot Online’s report found 92 per cent of Britons are confident with the term "savings account", 72 per cent understand the meaning of a "fixed mortgage" and 63 per cent are comfortable with the term "mortgage deposit".
An understanding of "cash Isa" and "building society" also featured highly in the results, with 78 per cent and 74 per cent of people understanding the terms respectively.
Source: Reboot Online Digital Marketing Agency
Shai Aharony, managing director at Reboot Online, acknowledged that while individuals can often get lost in translation of specialist jargon, the substantial impact of financial terminology on both minor and major saving and spending intentions means Brits should be more accustomed to them.
He said: "This research certainly shows a lack of knowledge and confidence to correctly understand a handful of financial terms in a range of important areas such as mortgages, pensions and savings.
"Going forward, there should be a real drive to educate Brits from an early age on the different aspects of the financial world that will more than likely affect their personal and business matters in adulthood."
Rhys Williams, strategy director at Quietroom, said the report's figures are not surprising and most worryingly in addition to a fundamental lack of understanding of financial terms, there is a deeper lack of confidence.
He said: "If terminology sends out a message that the subject is too hard to understand, people will disengage. The common denominator throughout research such as this is people feel confident when what they discuss is a concrete concept, for example cash in a savings account, compared to an abstract concept.
"The scary thing is the terms that can have the biggest impact on our lives are at the bottom of the pile - unless we correct this and make products more concrete and tangible, we are potentially shutting people out of a really important conversation about their financial future."
rachel.addison@ft.com
