One in three people who consider themselves financially literate do not know how a savings account works, a survey from the Current account Switch Service reveals.
Some 78 per cent of Britons consider themselves financially literate, the poll of 4,000 people by Cass found.
But of these, 29 per cent don’t know how a savings account works.
Similarly, 54 per cent of people say they have a good understanding of financial jargon yet seven in 10 of this group also don’t know how a savings account works.
One in three people who consider themselves financially literate do not know how a savings account works
Those surveyed were asked to define what a savings account was with five options including ‘I don’t know.’
The other options were an Isa, a deposit account held at a bank that pays interest, an account for everyday transactions with no interest or a loan product offered by banks.
Of the people who said they are financially literate, a fifth run out of money every month. This figure climbs to 41 per cent for those who don’t consider themselves financially literate.
Even among those who feel confident about their finances, over a quarter still find themselves running out of money up to every two months.
More than a quarter people are saving regularly with a plan for rainy days with just 6 per cent not saving at all.
There is strong demand for more support with personal finance education within school years with 86 per cent agreeing it should be on the national curriculum.
Only 32 per cent of those who consider themselves financially literate could correctly calculate compound interest on £1,000 invested at a 5 per cent annual rate.
While 29 per cent could not define what a savings account is, and 35 per cent struggled to explain what an Isa is.
Only 57 per cent of 18-24-year-olds feel financially literate, compared to 88 per cent of those aged 55 and older.
Men also feel more confident than women when it comes to managing their finances, with 35 per cent of men reporting they feel confident managing finances, compared to 25 per cent of women.
John Dentry, of Pay.UK, said: ‘These findings highlight the gap between perceived financial literacy and practical knowledge, as well as the strong desire for more financial education.
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