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A staggering 23 million people in Britain have been found to possess low levels of financial literacy, according to a recent survey conducted by Opinium for the investment group Abrdn.
This finding underscores the widespread difficulty many Britons face in making basic financial decisions regarding savings and investments.
The survey, which included 3,000 adults, revealed a troubling 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 Financial Literacy Excellence Center in the United States, which are internationally recognised benchmarks for measuring financial literacy.
Only 20% of respondents could answer all three questions correctly, while another 20% got none right, and 24% answered only one correctly. In 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 concerning, especially in a world where people are going to have to take more responsibility for their finances,” stated Sarah Moody, corporate affairs chief at Abrdn.
The lack of comprehensive data on how Britain compares with other countries for financial literacy is notable, as the UK has ceased participating in figures compiled by the Organisation for Economic Co-operation and Development. However, a Financial Conduct Authority (FCA) study found Britain ranked ninth out of 17 countries, just above Turkey and below Indonesia. The FCA’s financial lives study also revealed that 24% of UK adults lack confidence in managing their money, with the young, unemployed, and ethnic communities being the most affected.
Basic arithmetic skills and financial knowledge are crucial for helping people budget correctly, save for emergencies and retirement, and avoid unmanageable debt. The FCA considers better public understanding of finance as essential for protecting consumers from predatory lenders, investment scams, and other financial dangers.
“We’ve been asking for financial education to be baked into the system from primary school age,” Moody emphasised. However, early education in financial literacy remains inconsistent, with only 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 pledged to reform the maths curriculum to help students apply lessons to everyday life, including budgeting, purchasing holiday money, and following recipes, should Labour win the upcoming general election. Phillipson has highlighted Britain’s “chronic cultural problem with maths.”
The Abrdn study further found that only 33% of people with poor financial literacy had workplace or private pensions, compared to 51% of those with good financial literacy. Additionally, 39% of individuals with high financial literacy held investments, compared to just 21% of those 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 spotlight the critical need for enhanced financial education across the UK, starting from a young age, to equip individuals with the knowledge necessary to manage their finances effectively.
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