There are times in life when big financial decisions must be made. Whether it’s establishing a new business or buying a home, it’s important to understand how life-changing these products and services, and the decisions that make them happen, are.
How quickly do British consumers jump into financial decisions, and what kind of certainty is landing them there? These are questions raised by a new study by money.co.uk.
With rising everyday costs as well as interest rates, it is now more important than ever to be financially savvy.
The comparison website’s study inquires into the nation’s financial literacy rate through a survey of 2,000 people. Respondents were allocated via age and salary.
The age of risk
Overall, 64.45 per cent of Brits admit to taking out a financial product without fully understanding how it works. This was lowest for those aged 55+ (54.36 per cent) and highest among 35 to 44-year-olds (70.90 per cent).
Likewise, 62.55 per cent have ended up regretting entering into a financial agreement they didn’t fully understand. Again, remorse was most lacking among 55+ (50.74 per cent) and most common among 35 to 44-year-olds (67.00 per cent). Are we seeing a trend?
However, 66.90 per cent of Brits have refrained from engaging with a financial product because they didn’t fully understand it. Those aged between 25 and 34 are most prone to this restraint at 71.55 per cent while 55+ are the least (61.58 per cent).
The survey continues by asking the same set of questions but through the scope of salary.
The highest earners, £125,000 or more, are the most likely to jump into a financial decision without full understanding (70.00 per cent). Oppositely, the lowest earners surveyed, making under £15,000, were least likely to do so (58.87 per cent).
Those earning £30,000 to £44,999 are the income group most likely to have regrets when it comes to entering a financial agreement that they didn’t fully understand (68.09 per cent). As the median UK salary is £33,000, the average Brit falls into this category. Likewise, the least likely to have regrets was the income bracket £75,000 to £124,999 (60.10 per cent).
Looking at financial restraint due to lack of understanding, but through the lens of income, those earning £45,000 to £74,999 remain the most resilient (70.28 per cent) to bad decision-making. But the succeeding bracket, £75,000 to £124,999, is the most likely to take out a financial product without understanding its terms fully (63.64 per cent).
The survey indicates that financial regret generated by misinformation is common among all earners and age brackets. Yet it remains particularly pronounced among middle-aged middle-earners who are the most likely to make decisions that they’ll later go on to regret.