£21bn cashback, please
Last week the Money Advice Service said the average UK adult loses £428 every year, thanks (or no thanks) to confusion over financial jargon. That adds up to £21 billion a year. Ouch.
According to their research, many of us don’t understand the terms financial providers use. A worrying 84 per cent of us don’t read the full terms and conditions when buying financial products, which leads to a lot of bad decisions.
That sounds familiar. Not too long ago, we worked out that it takes a good 28 minutes to read a set of Ts and Cs. And that most of them are so hard to get through, you need a university-level reading age. (You can download our full report here.)
But hang on, did anyone read the quote from the Money Advice Service? It said: ‘Reading and understanding the terms and conditions of a financial product can seem long and unnecessary, but if you don’t, you may end up incurring unexpected penalties and possibly even impact your credit score.’
‘Incurring unexpected penalties’? ‘Impact your credit score’? What? Even a service set up to help people understand the ins and outs of money lapses into the occasional boardroom bingo phrase.
They’ve also taken a bit of a ‘buyer beware’ stance, implying that the onus is on us to decipher financial-speak. Rather than on the financial industry (who, by the way, want our money) to make it easier for everyone.
That’s telling. It’s like we’re resigned to the fact that a bank wouldn’t be a bank if it didn’t use language that obfuscates. Just look at the number of glossary-style websites out there trying to make sense of terms like ‘compound interest’, ‘annuity’, ‘EAR’ and ‘APR’. Sometimes the definitions can be equally frustrating: ‘Compound interest which is calculated not only on the initial principal but also the accumulated interest of prior periods.’
We shouldn’t just accept it though, should we? For once, I’d like to read something along the lines of: ‘We’ll pay you interest on the sum of money you originally saved with us, as well as on any interest you’ve earned since. So you’ll earn interest on your interest.’
Think how much the firm that really nails it would stand out from their competitors.
Fewer misunderstandings. Fewer complaints. Happier customers. And a handy £428 back in our pockets.