My mother recently asked me whether or not she should upgrade her bank account to the Santander 123 account.
I must confess I hadn’t paid much attention to this particular account before as I personally tend to keep as little as possible in current accounts.
But looking at the interest rates and my mother’s circumstances, I concluded she should apply for it.
What was interesting, though, was that a 77-year-old lady could not work out whether or not the account represented a good deal. This follows on from a recent survey of adults on personal finance.
Questions of a GCSE standard about tax, savings and interest rates baffled one third of adults who took part in a survey of 2,000 people.
The research found that more than one-third of adults are unable to answer basic questions about savings, the cost of a loan and tax.
Adults from all walks of life were tested by the Open University Business School on questions of a GCSE standard, which involved them making calculations to work out which savings accounts paid the most, how much income tax someone would be liable for, which currency exchange rates were the best and how expensive it would be to take out a loan.
Across all seven of the multiple choice questions they were asked, an average of 41 per cent of adults – two in every five – were unable to come up with the right answer. So it appears that my mother is in good company after all.
As a nation we do not think we’re good at maths. I’ve lost count of the number of times I’ve heard a British person admit as much, but I happen to think that everyone can be good at maths. It’s a question of belief as well as practice.
I was interested to find that my partner’s 14-year-old daughter was revising for an exam recently and had to answer some questions on compound interest and inflation. It’s really encouraging that children are being taught personal finance in schools.
With financial education set to become compulsory in schools across England from September this year, children aged five to 16 will learn how to manage their money on a daily basis and plan for future financial necessities.
Interestingly, if so many adults have trouble understanding personal finance then it is even more important for financial planners to explain personal finance to clients in jargon-free, simple English and to support their explanations with drawings, graphs and pictures.
I’ve felt for some time that our profession is so laden with jargon that Joe Public can easily get confused and not understand what is being recommended.
If that’s the case, the client is unlikely to proceed with the recommendations and will not be interested in building a long-term relationship.
There is clearly still a lot of work that needs to be done to change the typical British attitude to money but at least we have started moving in the right direction.
Tony Byrne is financial planning director at Wealth And Tax Management