27/12/2024

Baffling financial jargon means Brits are overlooking ways to boost their wealth

Brits are struggling with financial jargon and aren’t sure where to start with investing. It could mean some people are missing out on opportunities to increase their wealth.

A survey from Lloyds Bank found that 50% of Brits say they were scared of investing. Furthermore, 38% say financial jargon is baffling.

Misunderstanding common financial terms could lead some people to make decisions that aren’t right for them.

Despite dominating the headlines over the last year, 3 in 10 people said they didn’t understand “inflation”. As inflation has a direct effect on your cost of living, not understanding how it influences your outgoings could mean some budgets are no longer realistic.

Other common investing terms people are clueless about include:

• Asset class (77%)
• Dividend (42%)
• Stocks (37%)
• Portfolio (37%)
• Shares (31%)

Uncertainty about financial terms mean that many people find learning about finances daunting. In fact, 26% of people believe it would be easier to learn a new language than start investing.

Yet, half of the participants said they wanted to learn more about the basics of investing and finances.

Overlooking investing could affect your long-term wealth

If a lack of financial confidence means you’ve not considered investing, you could be missing an opportunity to grow your long-term wealth.

While money in a savings account is “safe”, the interest it earns is likely to be below inflation, which reduces the value in real terms.

Inflation means the cost of goods and services is rising, so your money will gradually buy less. Unless the interest you earn on a cash account exceeds inflation, the spending power of your savings is falling in real terms.

As inflation is currently high, the value of your savings could be falling quickly. However, even when inflation isn’t high, the compounding effect may have a greater impact on your savings over the long term.

In some cases, investing could help grow your wealth. Historically, investment markets have delivered positive returns over the long term, which might provide a way to increase your wealth at a faster pace than inflation.

However, it is important to note that investing isn’t always the right option. For instance, if you’re saving for short-term goals, a cash account may be more appropriate. Or if you don’t have an emergency fund, focusing on building one first could provide you with greater financial resilience.

All investments carry some risk and returns cannot be guaranteed, so just as crucial as deciding whether to invest is choosing which investments suit you.

Here are three ways a financial planner could help improve your investment and financial knowledge.

1. Cut through confusing financial jargon

If you’ve been putting off financial decisions because jargon means you’re not sure which options are right for you, speaking to a financial planner could be useful.

We can not only explain what financial terms mean, but why they may be relevant to you. Having your options explained in clear language could give you the confidence to take control of your finances.

2. Assess which investments could be right for you

The survey suggests that many people don’t know where to start when they want to invest. It’s easy to see why – there are a lot of options to choose from, and it can be difficult to know which ones may be right for you.

To understand which investments suit your goals, you may need to consider areas like your investment time frame, what other assets you hold, and your risk profile. You should also keep in mind how different investments can be used to create a balanced and diversified portfolio.

A financial planner can assist with all of these, helping you build a financial plan to suit your needs and circumstances.

3. Provide you with someone to turn to when you’re uncertain

Even the best-laid plans can go awry. Perhaps, health reasons mean you want to stop working sooner than expected. Or investment market volatility means the value of your portfolio has unexpectedly fallen.

Working with a financial planner on an ongoing basis means you have someone to turn to if you need reassurance or would like to update your financial plan. They can also help ensure your financial decisions continue to reflect your goals and economic circumstances.

Contact us to talk about your finances

If you want help creating a financial plan that suits you, please get in touch. We can offer advice and guidance so you can feel more confident taking control of your long-term finances.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance.