How financially literate is the average Brit?

Financial literacy isn’t taught in schools, so when the time comes to make our own financial decisions, many are understandably confused.

There are lots of different financial products available such as ISAs, savings bonds and balance transfer credit cards, making sure you fully understand them before choosing one is really important

However, many of us don’t properly know what a lot of these products are and how they can benefit us.

So, just how financially literate is the average Brit? And what are the financial issues that have us turning to Google and social media for help the most?

Have you ever taken out a financial product without fully understanding how it works?

When taking out a financial product such as a mortgage or personal loan, there’s a lot of complex industry language and a lot to take in. On top of this, properly reading through and understanding the terms and conditions would take a very long time.

Despite this, it’s still surprising to learn that more than 60% of people have taken out such a product without fully understanding how it works.

But younger people are seemingly a bit more financially literate (or are perhaps less likely to take out finance). Those aged 18 to 24 were most likely to say that they had jumped into a financial decision like this, with 40.34%.

Despite having more money, the highest earners were more likely to jump into a financial agreement. 70% of people earning £125,000 or more say they’ve taken out finance without fully understanding how it works. That figure gets lower along with the average earnings of respondents, with just 58.87% of those earning less than £15,000 answering “yes”.

Have you ever regretted entering into a finance agreement that you didn’t fully understand at the time?

Going into a financial agreement without all of the facts is always risky business, and that’s reflected in the number of people who regretted doing so.

With 64.45% of people saying that they had entered a finance agreement without understanding it, 62.55% said that they regretted doing so.

Those between 18 and 24 were least likely to have regrets about entering a financial agreement without the facts, with 61.45% saying they did. That number increases with age, until we reach those 55 and over, around half of whom expressed regret.

In terms of income, the group most likely to have regrets is those earning £30,000 to £39,999, with 68.09% saying they did.

Have you ever chosen not to take out a financial product due to not understanding the jargon surrounding it?

Taking out finance can be daunting, especially if you're faced with terms and concepts that you’re not familiar with.

Around two-thirds of people said that they had been put off taking out finance due to needing to understand the various jargon that comes with it.

Those aged 25 to 34 were most likely to avoid a financial product due to jargon (71.55%) compared to just 61.58% of those 55 and above.

Where do you get the majority of your information about personal finance from?

Financial literacy isn’t a topic commonly taught in schools, with just 1.4% saying it was where they got the majority of their information.

The most popular way that people try to gain financial literacy skills is via their friends and family (23.1%). However, this was very closely followed by researching personal finance blogs and websites (22.35%). This was also the most common source of information for men, with just under a quarter saying they use such blogs and sites.

There were some definite generational differences too. Younger people are far more likely to turn to social media and TV than older generations, with 17.39% of those under 18 using both. For those over 55, a financial advisor was the most common (22.66%).

Those in the top earnings bracket were also most likely to have a financial advisor or trusted expert (28.57%).

Which of the following do you wish you had been taught about at school?

With the lack of formal education on these topics, it’s interesting to see what the things that people most wish they had been taught are.

The most common was “how to budget”, with 63.9% saying they wish they had been taught this. However, it was fairly close between each of the topics, with 61.25% saying “savings” and 57.95% saying “mortgages”.

Looking at generational differences, those under 18 are most likely to wish they were more prepared when it comes to savings. For 18 to 24-year-olds this was taxes, while those between 25 and 54 were all most likely to say “how to budget”.

Given that pensions are obviously much more relevant the older we get, it’s not surprising that over 60% of over 55s answered with “pensions”.

What are the most commonly searched financial literacy questions?

1. Which credit card is best - 2.3 million annual searches

The financial literacy question that gets Googled the most is “which credit card is best?”, with over 2.3 million searches a year.

Finding the right credit card for you depends on exactly what you need from a card. For example, if you need to make a large purchase, you might want an interest-free credit card.

Or if you need to cut the interest that you pay on your credit card debt, a 0% balance transfer credit card might be right for you. To find the best credit card for you, be sure to compare our best credit card deals.

2. How to apply for a credit card? - 2.2 million annual searches

Another credit card question comes in second, with just under 2.2 million people a year searching for how to apply for a credit card.

To apply for a credit card you’ll have to meet certain criteria set out by the lender. For this reason, you’ll probably want to check your credit score before applying and perhaps take some steps to improve it if necessary.

If you’re eligible, then applying for a credit card is actually quite easy. Most applications are done online these days although you can also apply in person at the lender’s branches (if they have them).

3. How to calculate tax UK? - 2.1 million annual searches

In third place are queries about how to calculate your tax if you live in the UK, with just over 2.1 million searches.

If referring to Income Tax, GOV.UK has a handy calculator that will show you how much you should pay for the current tax year. There’s also a tool that you can use if you’re self-employed.

If you’re not able to use the calculator (such as if you pay into a workplace pension or are repaying a student loan) you can estimate your tax manually.

To do this you need to calculate your taxable income, as well as any deductions or allowances that you can subtract.

Then you would need to work out what rate you should be taxed at and calculate how much tax you would pay on the taxable amount of income.

Which financial literacy questions have seen the biggest increase in searches?

1. How to get a mortgage - 353%

Oct 2020 - Sept 2021 searches: 129,400

Oct 2021 - Sept 2022 searches: 585,700

By far the financial literacy query that saw interest increase the most in the past 12 months is “how to get a mortgage”.

Between October 2020 and September 2021, there were 129,400 searches for that question, compared to 585,700 a year later, an increase of 353%.

Applying for a mortgage can seem daunting, especially for a first-time buyer. Essentially you need to prove to a lender that you’ll be able to pay back the mortgage.

This is done by providing a number of forms to prove your income, but also give an idea of your expenditure.

Having all the relevant information prepared before you start the process will help things to move more smoothly.

2. What are mortgage rates today - 86%

Oct 2020 - Sept 2021 searches: 194,500

Oct 2021 - Sept 2022 searches: 361,100

Some distance behind, in second, is the question “What are mortgage rates today?”, which increased by 86%.

Mortgage rates have of course been a hot topic in recent months, as they skyrocketed due to economic uncertainty following the government’s ‘mini-budget’.

3. When to repay student loan - 85%

Oct 2020 - Sept 2021 searches: 505,400

Oct 2021 - Sept 2022 searches: 937,000

Narrowly behind, in third place, is the question “when to repay student loan”, which has seen its number of searches go up 85%.

You start to repay your student loan when you start earning a certain amount, with the threshold depending on your repayment plan.

Currently, these thresholds range from £20,195 to £27,295 a year (before tax and other deductions).

You can, of course, pay off your student loan earlier if you wish, and your payments will automatically stop if you stop working.

What are the most used financial literacy terms on social media?

1. Investing

TikTok views: 8.8 billion

Instagram posts: 13.7 million

For those turning to social media for their financial information, the most commonly shared term is “investing”.

The term has racked up an incredible 8.8 billion views on TikTok videos using it as a hashtag, with over 13 million posts shared on Instagram using the tag. That makes it the most shared financial term on both platforms.

Investing your cash can be a good way to make some extra money, although any investment comes with its risks.

2. Stocks

TikTok views: 7.2 billion

Instagram posts: 7.9 million

In second place is another term related to investing, with 7.2 billion views on “stocks” TikTok videos and 7.9 million Instagram posts shared. “Stocks” is the second-most shared financial term on both of these platforms.

Stocks are a type of investment that gives you a share of ownership in a company. You can either buy stocks directly or invest in a fund, which will invest in stocks on your behalf. 

3. Credit

TikTok views: 3.8 billion

Instagram posts: 3.6 million

In third place is the term “credit” which appears in 3.6 million Instagram posts and has seen 3.8 billion views in TikTok videos.

Credit essentially refers to the trust between you and a lender that you will repay the money that you have borrowed.

If you are given credit by a lender, this means that you’re in debt to them. You’ll be able to borrow this money on the basis that you will repay it within a certain period.