Financially incapable: one in five can't read bank statements
Study reveals thousands of us struggle with basic financial skills.
One in five adults are unable to understand their bank statements, according to startling research from the Money Advice Service.
Extensive research among 5,000 people, alongside consultation with key financial organisations and institutions, has revealed that as a nation we are fairly financially incapable.
One in ten of us are not in control of our finances, according to the study. A whopping 21 million Brits have less than £500 in savings, meaning they couldn’t pay an unexpected bill like a car repair or boiler breakdown without having to go into debt.
Given the low levels of savings it isn’t surprising to discover that eight million of us have problems with debt. Yet just one in six of those people are seeking help with the problem. Read where to get free debt advice.
Upon closer inspection, many of us don’t fully understand how interest rates work. A third of people cannot calculate the impact of a 2% annual interest rate on £100 in savings.
“Four out of ten adults are not in control of their finances, so for a great many people money is a constant source of worry and stress,” says Andy Briscoe, chairman of the Financial Capability Board. “This is a problem first and foremost for the individuals concerned and for their families, but it also has wider implications for society and the economy.”
The younger generation are particularly financially inept. The survey found that 24% of 18-24 year olds don’t keep track of their income and expenditure. Plus, the bulk of that age group (59%) cannot calculate basic interest.
The study also found it pays to talk. More than half (53%) of couples who discuss their finances are able to keep up with their bills without difficulty. Of those that don’t like to talk about money, the figure falls to 48%.
The Money Advice Service, along with the UK Financial Capability, have published a 10-Year Financial Capability Strategy with the aim of improving people’s ability to manage their money.
“The stubbornly low levels of financial capability in the UK can no longer be tolerated,” says Briscoe.
You can find out more about the strategy on the FinCap website.
Common bank statement abbreviations decoded
Confused by the letters on your bank statement? Here's what they actually mean.
APR: Annual Percentage Rate (relates to credit interest)
BP: Bill payment
BGC: Bank Giro credit
CDL: Career Development Loan
CPT: Cashpoint withdrawal
CRE: Credit payment
DEB: Debit payment
DEP: Deposit
DD: Direct Debit
IBAN: International Bank Account
IMO: International Money Order
REM: Remittance or a cheque credited to your account that was not paid in at your account-holding branch or bank
REV: Reversal or a standing order or Direct Debit that has been recalled
SO: Standing order
UNP: Unpaid
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