Most adults think they're financially literate

Most adults reckon they’re financially savvy, but new research from Pay.UK paints a different picture, having identified a surprising gap between what people say they understand and the reality.

Understanding financial literacy

Financial literacy refers to the skills required to understand and handle money effectively. It enables you to read a payslip, create a budget, make important financial decisions, and plan for the future.

Understanding money matters can be quite tricky, as there are many different concepts and products out there. Being financially literate can help you steer clear of common pitfalls.

The reality of financial management

Pay.UK’s research found:

• 19% of those who consider themselves financially literate run out of money every month.
• This figure rises to 41% among those who don’t see themselves as literate.

Despite high confidence levels, the research tells a different story:

• 28% of UK adults save regularly with a plan for rainy days.
• Only 6% don’t save at all.
• 35% prefer a manual approach to managing their finances (think notebooks and spreadsheets).
• 30% are proactive in learning about complex financial terms such as pensions and taxes outside of formal education.

This suggests that although many people are trying to handle their finances, there's still a considerable gap in understanding important aspects.

Generational and gender differences

The research also highlights generational and gender divides in confidence levels.

While 88% of those aged 55 and older feel financially literate, only 57% of 18-24-year-olds share the same sense of assurance.

Additionally, 35% of men feel they can manage their finances well, compared to just 25% of women.

This gap raises concerns about how well current financial education methods are working.

It suggests that there’s a need for more inclusive financial education that considers the specific challenges various groups encounter.

The emotional toll of managing money

Managing personal finances can be a source of anxiety for many.

According to the study, 23% of respondents reported feeling stressed about their financial situation. It’s no wonder, really. With so many financial products and terms floating around, it can feel like navigating a minefield.

So, what can we do to alleviate this stress and improve financial literacy? Well, it starts with education and open conversations about money.

Talking about finances shouldn’t be taboo; it should be as normal as discussing the weather.

A clear need for improved financial education

One key finding from the study is the overwhelming demand for better financial education, which helps people manage their finances, make smart choices, and prepare for a stable future.

Many people feel that personal finance should be included in the school curriculum, with 86% of adults in the UK supporting this idea.

This lack of education can result in poor financial choices later in life.

In an ongoing survey, we found that 95% of customers who reached out to us for assistance with debt issues had not received any financial education. Furthermore, 81% felt that having this knowledge could have greatly altered their current circumstances.

We think that improving financial education in schools could greatly benefit all children by helping them steer clear of money troubles in the future.

Steps towards better financial literacy

If you’re feeling a bit lost, there are some simple steps you can take to feel more confident financially:

• Start with the basics – understand key terms like savings accounts, ISAs and compound interest.
• Seek out resources –  Money Saving Expert offers a free personal finance course at the Open University while you can also download a free copy of founder Martin Lewis' financial education textbook.
• Talk to others – share your financial experiences and learn from friends and family.
• Use budgeting tools – our free calculator can help you keep track of your finances.
• Stay informed – follow financial news to stay updated on market trends and personal finance tips.