One in five Brits don’t understand what the word “recession” means, research suggests.
More than a fifth (22%) of UK adults told Raisin.co.uk Our research shows that more than a fifth (22%) of British adults are bewildered by financial terminology, putting them at a disadvantage in understanding and growing their money.
What’s more, two in five (42%) are concerned they’re not making the most of their money because they lack vital financial knowledge.
This rises to two in three (57%) of 23 to 34-year-olds – 56% of whom already have debt.
The term “effective annual rate” (EAR) – the return on a savings account, accounting for compounding interest – causes the most confusion, with 77% of people admitting they don’t know what it is.
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However, words like “inflation” and “recession”, which appear frequently in the media – especially currently, during the COVID-19 pandemic – also confuse a fifth of people, with 19% and 20%, respectively admitting to not understanding what they mean.
This could potentially be leaving millions of Brits too ill-informed to sufficiently prepare for the financial impact of the coronavirus crisis, the study’s author noted.
Additionally, just 22% of adults feel they can turn to friends or family who work in the industry to help them understand the financial jargon, with only 15% speaking to their parents.
“The last 12 months have been incredibly testing for UK consumers,” said Kevin Mountford, co-founder of Raisin.co.uk.
“With multiple rate drops from the Bank of England, to wide-spread speculation of a recession and negative interest rates, there is a lot for consumers to process.
“The research clearly shows that people are too ashamed or fearful to speak to friends or family about these issues.”
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Other terms Brits find confusing include “annual equivalent rate” (62%), “gross domestic product” (43%), “annual percentage rate” (34%), “variable interest rate” (29%) and “stocks and shares” (28%), the study found.
Mountford added: “If you do not know something, you should never be afraid to ask a question to make sure you have all the facts and can make the best decision.
“Whether it’s finding the most competitive savings rate to maximise your earnings, or the cheapest loan deal to ensure you do not pay over the odds.”
Watch: What is a recession?