Personal finance literacy worsens amongst British adults

Despite personal finance issues taking centre stage over the past 12 months, the latest research from Abbey Banking has found that financial literacy amongst British adults has in fact declined since this time last year.

In August 2007 Abbey set a simple GCSE level personal finance exam amongst a representative group of adults, and found that one-in-ten (5.9 million) would fail to achieve the 40 per cent mark needed to achieve grade GCSE grade C (or O'Level pass). One year on and a repeat of the exercise shows that the number of adults failing to achieve a grade C has increased by 1.2 million adults - to one-in-seven.

At the top end of the scale one-in-four adults (25 per cent) matched last year's results by scoring an A*, but straight As were down on last year by 2 per cent - to 28 per cent. Twenty two per cent were on for a respectable B (up one percent from last year), but C grades fell year on year from 13 to 12 per cent.

Government plans to introduce personal finance skills into the Maths GCSE should certainly be welcomed by 18-24 year olds, since they slipped from an average score of 56 per cent in 2007 to 53 per cent in 2008.

The top wrong answers were:

88 per cent didn't know that they get six weeks to pay back a credit card before it accrues interest. (86 per cent last year)

38 per cent failed to explain that negative equity is where your mortgage is larger than the value of your house. Better than last year when 47 per cent got the answer wrong.

25 per cent were unaware that failure to pay a secured loan meant that your house could be sold to pay for the loan, up 2 per cent on last year. Five per cent thought that it involved selling off the contents of your house.

18 per cent don t know what hire purchase means, against 12 per cent last year.

Steve Shore, Abbey Banking Director, commented: "While most people are in the realms of a GCSE pass, the failure rate has increased by over one million. Quite worrying given that the credit crunch and cost of living has dominated the front pages for the past twelve months - and people say that they are more interested in understanding their finance than ever before."

Abbey arranged for 1,054 adults to answer the same 10 simple questions it set last year - taken from a past examination paper with an equivalent level difficulty to a GCSE. It is launching the results during GCSE results week to highlight the dwindling of basic personal finance skills amongst British adults.

Abbey has a range of youth and student bank accounts, all of which have access to branch advisers who can help with the best ways to manage your money. For more information, log on to abbey.com or visit your local branch.