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Two-fifths of Britons lack basic financial literacy, survey finds
According to recent research conducted by Opinium for investment group Abrdn, around 23 million people in Britain have low levels of financial literacy.
This finding highlights the widespread difficulty many Britons face in making basic financial decisions about savings and investments.
The survey, which included 3,000 adults, revealed a worrying level of ignorance or confusion about fundamental financial concepts. For the first time, participants in Britain were asked three key questions developed by the Global Center for Excellence in Financial Literacy in the United States, which are internationally recognized benchmarks for measuring financial literacy.
Only 20% of respondents were able to answer all three questions correctly, while another 20% got none right and 24% answered only one correctly. By comparison, nearly 30% of Americans answered all three questions correctly in a similar 2021 study.
These questions assessed basic understanding of interest rates, the impact of inflation on savings and the merits of investment diversification. The results indicate that approximately two-fifths of UK adults, or 23 million people, have poor financial literacy.
“This is worrying, especially in a world where people will have to take more responsibility for their finances,” said Sarah Moody, head of corporate affairs at Abrdn.
The lack of comprehensive data on how Britain compares to other countries financial literacy This is notable given that the UK is no longer included in the figures compiled by the Organization for Economic Co-operation and Development. However, a study by the Financial Conduct Authority (FCA) found that Britain came ninth out of 17 countries, just above Turkey and below Indonesia. The FCA’s financial life study also revealed that 24% of UK adults lack confidence in managing their money, with young people, the unemployed and ethnic communities most affected.
Basic arithmetic skills and financial knowledge are crucial in helping people budget correctly, save for emergencies and retirement, and avoid unmanageable debt. The FCA sees a better public understanding of finance as essential to protecting consumers from predatory lenders, investment scams and other financial dangers.
“We have been calling for financial education to be integrated into the system from primary school age,” Moody emphasized. However, early financial literacy education remains inconsistent, with just 47% of children receiving meaningful financial education at home or school, according to the Money and Pensions Service.
Labour’s shadow education secretary Bridget Phillipson has promised to reform the maths curriculum to help pupils apply lessons to everyday life, including budgeting, buying money for holidays and tracking recipes, if Labour wins the next general election. Phillipson highlighted Britain’s “chronic cultural problem with maths”.
The Abrdn study further found that just 33% of people with low financial literacy had workplace or private pensions, compared to 51% of people with good financial literacy. Additionally, 39% of individuals with high financial literacy had investments, compared to just 21% of people with low financial literacy. Only 20% of people reported having a good understanding of savings products, while a mere 12% claimed a good understanding of investments.
These findings highlight the critical need for better financial education across the UK, from a young age, to equip individuals with the knowledge they need to manage their finances effectively.