Talk Money Week: Experts break down financial jargon, as 46% admit to money issues from misunderstanding financial terms

• 46% of Brits have encountered money issues due to misunderstanding financial terms.
• 32% of Brits said they felt uncomfortable when discussing money issues.
• Ahead of Talk Money Week, Lowell has teamed up with financial charity MyBnk to encourage Brits to talk openly with young people in their families about money.

Recent survey results by Lowell showed that 46% of Brits have encountered money issues due to financial misunderstandings, highlighting just how important financial literacy is to maintaining financial health. ¹

With reports revealing that just 41% of young people are deemed as financially literate², ahead of Talk Money Week, Lowell has teamed up with financial charity MyBnk to highlight the key terms people get wrong the most, and encourage Brits to talk more openly with young people in their family about money, to better equip them for their future.

What are the financial terms most likely to be misunderstood?

Balloon payment is officially the most misunderstood financial term, with 79% of Brits confessing they don’t know the meaning. Although a personal contract purchase (PCP) is one of the most popular ways to buy a car, Brits aren’t aware that they should prepare for an end-of-term lump-sum balloon payment before they take the loan out to avoid a big surprise fee.

Even though APR (Annual Percentage Rate) is a key part of borrowing on credit cards or loans, almost half (47%) don’t know that a high APR will increase repayments.

Furthermore, although equity is a term used through the house buying process, 46% don’t understand how much of their home they own.

Plus, one in four (24%) claim they do not know what interest is, even though it can have positive implications when saving.

As well as the financial implications of not understanding some technical terms, Brits are also facing personal difficulties because of money problems brought on by a lack of financial understanding.

With 32% of Brits admitting they feel uncomfortable when discussing money problems, Lowell has partnered with financial charity MyBnk to encourage people to talk more openly about money in the home. Talking about money with younger people in the family can encourage a better start developing a positive relationship with money, and equip them with the skills they need to make smart financial decisions for the rest of their lives.

How can Brits talk about money with younger children within their family?

People often find it hard to talk about money due to shame, anxiety, and fear of being a burden to others. It can feel even more daunting talking to young people about money when you are an adult. However, with money habits forming from a young age, the more open and honest you can be, the more likely young children are to develop a healthy relationship with their finances.

This doesn’t mean you have to share every detail of your personal finances, but you can take steps such as:

• Discussing the cost of everyday items and ensuring their awareness that money is finite.
• Asking what they already know about money, such as the cost-of-living crisis and energy bills, to prevent any misconceptions or worries.
• Sharing your everyday good money habits, such as:
• Do you take a packed lunch to work?
• Do you walk instead of paying for transport?
• Do you sell items you no longer use or need online?

Commenting on the partnership Leon Ward, CEO of MyBnk said, “We are pleased to work with Lowell to support Talk Money Week – an important opportunity to encourage people to talk about money more openly. We hope that our resources and activities will help people to learn more about money and improve their financial wellbeing. Anybody interested in finding out more or booking in a session with MyBnk can visit mybnk.org.”

For extra information on how to talk to someone about debt, visit Lowell’s blog here: https://www.lowell.co.uk/about-us/lowells-blog/wellbeing/time-to-talk/

For full explanations on each of the most misunderstood financial terms, please visit: https://www.lowell.co.uk/help-and-support/debt-guidance/debt-dictionary-financial-jargon-terms-explained/