Cash Clueless: 44% of Brits don’t know what an overdraft is

With the last year throwing many people into financial turmoil, the importance of having a firm grip on your personal finances was highlighted more than ever. However, a new study has found that more than one in four (28%) people in the UK don’t feel confident when it comes to handling their personal finances

The research, from debt management company Lowell, has found that just a third of people (34%) claim to feel “very confident” when handling their finances. This then falls to just 19% of young people (aged 16-25).

The research also found that a significant number of Brits don’t understand key financial terms such as ‘overdraft’ (44%), ‘mortgage’ (46%), and ‘arrears’ (52%).

Financial education from a young age could be the key to helping young people better prepare themselves financially, as 84% of Brits believe that being taught about finances at school could help prevent financial issues in the future.

Where do we get our financial advice from? 

Confusion over personal finances could be linked to the varied sources from where Brits look for financial advice.

When looking for financial advice, over a third (36%) of Brits say they would go to their bank whilst 35% would see a financial advisor. However, a quarter (27%) rely on family and friends for advice, and 9% use social media.

Personal finances in young people 

Young people seem to be struggling when it comes to understanding their personal finances. A huge 44% wouldn’t say they were confident with their finances, and one in 10 (11%) claim to have no confidence at all in their own understanding of personal finance.

Just a fifth (20%) of those aged 16-24 knew what an overdraft was, and only 5% claimed to know the meaning of arrears.

As well as this, young people are more likely to use social media platforms like TikTok and Instagram to access financial advice than go to a bank (19% Vs 17%).

Hannah Cribb, 22, from Liverpool, agrees that she lacks confidence when it comes to her finances. She said: “I have a bank account and a student overdraft, and I know my wages get paid into my bank account, but that’s about it. I don’t have any loans or credit cards, and I wouldn’t even know where to start looking if I wanted one. I would feel stupid going into my bank as I would have no idea what to ask for!

“I sometimes watch TikToks about financial advice but it’s more about money-saving tips and that kind of thing. If I needed a loan or anything I’d probably just ask my mum where she would go and do the same.

“I do think financial education is really important – I’d love to have to confidence to do more with my money, but I wouldn’t even know where to start.”

Commenting on the findings, John Pears, UK CEO of Lowell, says: “”It’s worrying to see how one in four people just don’t feel confident with their personal finances, given how critical this is to being able to manage your money well.

“We really want to encourage people to get some help in order understand their finances better, through trusted, regulated channels that ensure all advice is in the individuals’ best interests.

“We believe it is so important for consumers to feel empowered and in control of their finances, here at Lowell we are talking to consumers daily and directing them for advice where it is needed. A range of independent and impartial support is available for anyone who is struggling with their finances. A helpful list is available at our website https://www.lowell.co.uk/help-and-support/independent-support/”