By Oliver Smith on Friday 23 April 2021
But half of the population can’t answer basic questions about finance, and retirement topics flummox 80% of people.
Do you know what an ISA is? Chances are, as an AltFi reader you do, but over a third of people in Britain (37 per cent) can’t say the same.
Investing app Freetrade working with Opinium surveyed 2,000 people across the country with 18 basic questions about savings, investments, ISAs and retirements, the kinds of questions “everybody will likely encounter at some point in their lives”.
It’s part of their ‘Great British Financial Literacy Test’, and the results were pretty disappointing.
Just over half of people (52 per cent) ‘passed’ the test, with questions around investing and retirement causing the most issues (failure rates of 44 per cent and a whopping 80 per cent, respectively).
“There should be alarm bells ringing here,” said Freetrade senior analyst Dan Lane.
“With advances in medical technology and increased life expectancies, we’re likely to live longer in retirement than ever before. But a massive gap in our understanding of how to invest for our third age, or even how to access those investments suitably later on, means we really aren’t prepared for a sizable portion of our lives.”
When looking at financial literacy by city, Freetrade found those living in Brighton were the most financially literate with an average pass rate of 55 per cent, while Sheffield came bottom of the list with an average pass rate of 47.6 per cent.
Indeed the results echo what we found in AltFi’s Digital Wealth State of the Market Report last year, namely a worrying lack of financial literacy.
On the investment front, obviously of most interest to Freetrade, 91 per cent of respondents said they lack confidence in investing, the 44 per cent failure rate skewed towards younger investors (52 per cent fail rate among 18-24-year-olds).
“The greatest advantage you can give your investments is time. So it’s concerning that the cohort with the most time on their hands feels so ill-equipped,” said Lane.
“Whether we realise it or not, investing early on in life could be the difference between reaching our eventual financial goals or missing them entirely. Getting to grips with the basic concepts later in life might just be too late.