Young adults still confused over finances
Many young adults have been using the past year to improve their understanding of personal finance, a survey suggests.
But despite the positives, some still lack the knowledge of financial products and services which could help them make informed decisions, according to Hitachi Capital UK.
Around 51% of 18-34-yearolds improved their financial literacy during the lockdowns and say they’re more confident about financial products and services.
But the research also found knowledge gaps. Two-thirds (66%) did not realise that taking a personal loan payment holiday could increase the overall cost, with interest still building up.
Misconceptions around annual percentage rates (APRs) are also widespread, with 30% of 18-34year-olds incorrectly believing the APR on a personal loan is always higher when borrowing larger sums of money. In reality, the APR can sometimes be lower for borrowing larger amounts.
More than half of 18-34-yearolds surveyed were unaware that applying for multiple credit at the same time could damage their credit score and reduce their chances of acceptance.
What’s more, the research found that 8% of millennials and those in generation Z don’t take time to understand the terms of a financial product before signing a personal finance agreement, the survey of 2,000 people across the UK in April found.
Vincent Reboul, managing director of Hitachi Capital Consumer Finance, says: “It’s positive that so many people have used this time during the pandemic to become financially savvier, and encouraging that younger age groups now have a better understanding of consumer finance products.
“But misplaced confidence can lead to common misconceptions about how financial products work, which is why it’s important to take time to understand the implications. It’s also paramount that financial services providers continue to improve communications on the products and services they offer.”