50% of UK adults claim a good understanding of banking jargon but 71% don’t know how a savings account works. Source: Shutterstock.com

There is a gap between how much people say they understand about money and the reality. 78% of UK adults consider themselves financially literate yet 71% of don’t know how a savings account works.

That is according to new research from Pay.UK, owner and operator of the Current Account Switch Service.

Financial literacy alone doesn’t always safeguard individuals from financial difficulties. Among those who view themselves as financially literate, 19% run out of money every month.

This figure climbs to 41% for those who don’t consider themselves literate. Even among respondents who feel confident in their ability to manage finances, 27% find themselves running out of money up to every two months.

However, it’s also important to note that over a quarter of UK adults save regularly with a plan for rainy days and just 6% don’t save at all. 35% of Brits use a manual approach to manage their finances (such as notebooks and spreadsheets) and 30% have taken the initiative to learn about financial terms like pensions and taxes outside of school.

There is strong demand for more support with personal finance education within school years with 86% of UK adults agreeing it should be on the national curriculum

The generational divide is striking. While 88% of those aged 55 and older feel financially literate, only 57% of 18-24-year-olds share the same confidence. In addition, 35% of men feel confident managing finances, compared to 25% of women.

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John Dentry, Product Owner at Pay.UK, commented: “These findings highlight the gap between perceived financial literacy and practical knowledge, as well as the strong desire for more financial education. In a challenging economic environment, it is more important than ever to ensure that people across the UK have access to the education and resources so they can feel more assured about managing their finances effectively. From understanding the basics of savings accounts to navigating more complex products like ISAs, there is a clear demand for better financial literacy initiatives across all age groups.

“A good starting point for building confidence when managing your day-to-day finances is considering whether your current account meets your needs. Researching the right account can help you learn more about managing your money. Switching to a bank that offers better tools, support, or even rewards can help people feel more in control of their money and encourage better financial habits.”