A study of 2,000 UK adults has found that 56% feel swamped by financial jargon, with 42% saying it puts them off investing altogether. The research, commissioned by smart money app Plum, identified the 25 most perplexing financial terms and acronyms, including 'capital gains', 'compound interest' and 'variable rate'.
Widespread confusion over common terms
Nearly a third (31%) of adults do not fully understand what 'capital gains' means, while 23% are not certain they could explain what 'APR' stands for. Other terms that proved difficult to grasp include 'unarranged overdraft' (17%), 'credit score' (17%) and 'standing order' (15%).
The research also showed that fewer than one in five (17%) feel they fully comprehend the forthcoming changes to ISAs, which will see the Cash ISA allowance altered from £20,000 a year to £12,000 for those under 65. This is alongside a 22% tax on interest earned on uninvested cash held within a Stocks and Shares ISA.
Confidence and information sources
Even among those who claimed at least some knowledge of the changes, 41% could not correctly identify the new Cash ISA allowance as £12,000. The study found that 28% of adults lack any confidence when trying to understand information provided by banks and financial institutions, while 54% feel overwhelmed when faced with decisions about savings and investments.
The internet continues to be the primary source for financial decision-making (41%), followed by banks (29%) and relatives (21%). Yet 27% of Gen Z seek advice through social media platforms, in stark contrast to only 1% of Boomers.
Expert comment and calls for clearer communication
Rajan Lakhani, personal finance expert for Plum, said: "Finances can be tricky to navigate, especially with the forthcoming changes to Cash ISAs and Stocks and Shares ISAs. Money is something we deal with every day and not understanding something related to our personal finances could cost us dearly. But some of the jargon can be overwhelming – leaving many people simply avoiding their finances and possibly missing out as a result."
He added: "For example, investing has historically been the most reliable way to help avoid inflation eroding the value of your money in the long-term, yet many people are missing out because they don't understand the terms. We want people to feel confident managing their money, so hope these clear explanations of the most confusing terms will help when someone isn't sure what something means and how it will impact them."
More straightforward explanations from banks (51%), financial education within schools (46%), and reducing jargon in emails and written communications (43%) were all identified as crucial measures for enhancing public understanding.
Top 25 most confusing financial terms
Rajan Lakhani, from Plum, added: "The research shows confusion about financial terminology makes decisions about money more daunting. It also highlights that many people are not turning to reliable, curated and regulated sources of information. We hope by making bitesize financial information accessible and easier to understand, we can help people of all generations feel assured taking control of their finances and planning for the future."
The top 25 most confusing financial terms and acronyms are: ETF, IPO, IBAN, BIC/SWIFT code, AER, Capital Gains, Compound interest, Bond, FSCS Protection, Dividend, APR, Stocks & Shares ISA, Accrued Interest, Maturity, Cash ISA, ISA, GBP, Remortgaging, Unarranged Overdraft, Credit score, Variable rate, Mortgage, Investment, Standing Order, and Credit limit.
