Millennials have proved they have the worst grasp of financial terminology of any age group in a survey carried out by online finance broker Solution Loans. Nearly two thirds of those aged 25-34 couldn’t spot the correct definition of Annual Percentage Rate, commonly referred to as APR. This is despite the important role APR plays in deciding the overall cost of mortgages and loans.
38% of millennials also don’t understand what a balance transfer credit card is. This is surprising given that in the UK there are currently 59 million credit cards in circulation and balance transferring is a common practice for managing money across credit cards.
Pensions were another area of confusion, with 43% of people across all age groups unable to correctly identify the definition of an auto enrolment pension. This is despite nine million people joining a workplace pension scheme since 2012.
To carry out the test, Solution Loans surveyed 1,000 people, asking them to identify which definition out of a possible six was the correct one for a given financial term such as APR, autoenrollment or compound interest.
Amanda Gillam from Solution Loans said: “In the UK, debt and credit is a way of life. It’s how we buy our homes, our cars and pay for many of our bigger purchases.
“Yet we found that when it comes to understanding how financial products work and specifically how interest and debt are calculated, as a nation our financial literacy is lagging. This is especially the case for the young. It’s worrying to think that especially young people are making potentially life altering decisions based on flawed or know knowledge of the financial products that they’re using. It’s key for future generations that financial literacy is taught, and a better understanding is achieved.”
For the full results of the study visit: https://www.solution-loans.co.uk/blog/data-shows-debt-prone-millennials-have-poor-grasp-of-financial-basics/
