23 million people in the UK have low levels of financial literacy, according to a recent survey by investment group Abrdn’s Opinium.
This finding underscores the widespread difficulty many Britons face in making basic financial decisions about saving and investing.
The survey of 3,000 adults revealed a worrying level of ignorance or confusion about basic financial concepts. For the first time, respondents in the UK were asked three key questions developed by the US-based Centre of Excellence for Financial Literacy, which are internationally recognised standards for measuring financial literacy.
Only 20% of participants were able to answer all three questions correctly, while another 20% were unable to answer any of them correctly, and 24% answered only one question correctly. By comparison, nearly 30% of Americans answered all three questions correctly in a similar study conducted in 2021.
These questions assessed a basic understanding of interest rates, the impact of inflation on savings, and the benefits of diversifying investments. The findings suggest that nearly two-fifths of UK adults, or 23 million people, have poor financial literacy.
“This is worrying, especially in a world where people are having to take more responsibility for their finances,” said Sarah Moody, head of corporate affairs at Aberdeen.
The lack of comprehensive data on how Britain compares to other countries in terms of financial culture is notable, as the UK has stopped participating in figures compiled by the OECD. However, a study by the Financial Conduct Authority found that Britain ranked ninth out of 17 countries, slightly higher than Turkey and lower than Indonesia. The Financial Conduct Authority’s Financial Life Study also revealed that 24% of UK adults lack confidence in managing their money, with young people, the unemployed and ethnic communities most affected.
Basic numeracy skills and financial knowledge are crucial to helping people budget properly, save for emergencies and retirement, and avoid unmanageable debt. The Financial Services Authority considers that a better public understanding of finance is essential to protect consumers from predatory lenders, investment scams and other financial risks.
“We have been calling for financial education to be integrated into the system from primary school age,” Modi stressed. However, early education on financial literacy remains inconsistent, with only 47% of children receiving meaningful financial education at home or school, according to the Department of Money and Pensions.
Labour’s shadow education secretary Bridget Phillipson has pledged to reform the maths curriculum to help students apply lessons to everyday life, including budgeting, holiday money and following recipes, if Labour wins the next general election. She highlighted Britain’s “endemic cultural problem with maths”.
The Aberdeen study also 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 hold investments, compared to only 21% of those with low financial literacy. Only 20% of people said they had a good understanding of savings products, while only 12% said they had a good understanding of investments.
These findings highlight the urgent need to strengthen financial education across the UK, starting from an early age, to equip individuals with the knowledge to manage their finances effectively.