Research by smart money app Plum has found that the majority of Brits are overwhelmed by confusing financial terms – and admit this puts them off dealing with their finances
The top 25 most baffling financial terms and acronyms include ‘capital gains’, ‘compound interest’ and ‘variable rate’. A survey of 2,000 adults found that 56% are swamped by financial jargon, with 42% confessing this puts them off investing.
Nearly a third (31%) don’t fully understand what is meant by ‘capital gains’, while 23% aren’t confident they could explain what ‘APR’ means. Others don’t feel they know what an ‘unarranged overdraft’ (17%), ‘credit score’ (17%) or ‘standing order’ (15%) is.
It also emerged that fewer than one in five (17%) feel they completely understand the upcoming changes to ISAs, which will see the Cash ISA allowance reduced from £20,000 a year to £12,000 for under 65s, as well as a 22% tax on interest earned on uninvested cash held within a Stocks & Shares ISA.
Even among those who claimed to have at least some understanding of the changes, 41% could not correctly identify the new Cash ISA allowance as £12,000.
The study was commissioned by smart money app Plum, which is helping to demystify the confusion by creating a glossary of the most perplexing financial terms.
Rajan Lakhani, personal finance expert for the app said: “Finances can be tricky to navigate, especially with the forthcoming changes to Cash ISAs and Stocks & Shares ISAs. “Money is something we deal with every day and not understanding something related to our personal finances could cost us dearly.
“But some of the jargon can be overwhelming – leaving many people simply avoiding their finances and possibly missing out as a result.
“For example, investing has historically been the most reliable way to help avoid inflation eroding the value of your money in the long-term, yet many people are missing out because they don’t understand the terms.
“We want people to feel confident managing their money, so hope these clear explanations of the most confusing terms will help when someone isn’t sure what something means and how it will impact them.”
The study revealed that 28% of adults don’t feel at all confident in understanding information from banks and financial providers, with 54% feeling overwhelmed when it comes to making savings and investment decisions.
The internet is the top place people turn to for help in making a financial decision (41%), ahead of banks (29%) and family members (21%). However, 27% of Gen Z turn to social media, compared to just 1% of Boomers.
Clearer explanations from banks (51%), being taught banking terms in school (46%) and using less jargon in emails and information (43%) were all top solutions for better understanding.
Rajan Lakhani, from Plum, added: “The research shows confusion about financial terminology makes decisions about money more daunting.
“It also highlights that many people are not turning to reliable, curated and regulated sources of information.
“We hope by making bitesize financial information accessible and easier to understand, we can help people of all generations feel assured taking control of their finances and planning for the future.”
TOP 25 MOST CONFUSING FINANCIAL TERMS AND ACRONYMS :
- ETF
- IPO
- IBAN
- BIC/ SWIFT code
- AER
- Capital Gains
- Compound interest
- Bond
- FSCS Protection
- Dividend
- APR
- Stocks & Shares ISA
- Accrued Interest
- Maturity
- Cash ISA
- ISA
- GBP
- Remortgaging
- Unarranged Overdraft
- Credit score
- Variable rate
- Mortgage
- Investment
- Standing Order
- Credit limit