According to new research, one in five (21%) Brits have had a relationship breakdown due to financial misunderstandings, and 14% have even resulted in divorce.
The new nationwide study from credit management company Lowell determines the detrimental effects misunderstanding a money term has had on relationships across the UK, and the key commonly-used financial terms that are misunderstood the most, such as equity when buying a home together, joint accounts and more.
In fact, their data shows that not discussing debt is the main source of money problems for 13% of Brits and a third (33%) said their financial issues were caused by borrowing from a family member or loved one.
Lowell has uncovered the impacts of money problems on relationships and health below, with the aim to help people feel more comfortable discussing debt with their partners while fully understanding money jargon in the process.
Personal difficulties as a result of money problems
What personal difficulties are being faced because of money problems brought on by financial misunderstandings?
Almost half (41%) have lost sleep due to stress, 21% have split up with their partners and 14% have even gone through a divorce, which will add even more financial strain as the application alone is £593, and the average total cost is around £14,561. Further health issues include weight loss (14%), alcohol or substance abuse (11%) and mental health problems (21%) too.
Difficulties faced as a result of the money problems
|Lost sleep due to stress||41%|
|The ability to save money||30%|
|Split up with a partner||21%|
|Mental health issues||21%|
|Weight loss/health issues||14%|
|Fallen out with family or friends||13%|
|The loss of housing||9%|
What are the financial terms most likely to be misunderstood?
A balloon payment is officially the most misunderstood financial term, with 79% of Brits confessing they don’t know the meaning. Although a personal contract purchase (PCP) is one of the most popular ways to buy a car, Brits aren’t aware that they should prepare for an end-of-term lump-sum balloon payment before they take the loan out to avoid a big surprise fee.
Even though equity is a term used through the house-buying process, almost half (46%) don’t understand how much of their home they own.
Plus, over a third (35%) claim they do not know what a joint account is, even though this can have an unintended impact on their financial well-being on themselves and their partner.
Furthermore, 32% say they do not understand the meaning of a credit score, yet this can have a big impact on whether you can apply for credit, including mortgages.
Which of these financial terms do you not know the meaning of or understand?
A general lack of financial knowledge and misunderstanding of money terms has resulted in 8% of people in the UK accumulating up to £500 worth of debt, and 9% have accrued up to £1,000. In some circumstances, one in 50 (2%) even have over £10,000 worth of debt.
As well as the hefty financial implications, Brits are also facing personal difficulties as a result of money problems brought on by a lack of financial understanding.
John Pears, UK managing director of Lowell UK said: “At Lowell, we know the importance of understanding your finances.
“The cost-of-living crisis is having a huge impact on many households, and in such an intense financial period, we want to ensure that people are as well-equipped as possible to handle their finances so that they don’t have a heavy influence on people’s personal lives.
“Our report shows a high percentage of money problems were due to a lack of financial understanding. We want to help break down the stigma surrounding money and people asking for help because it’s very difficult to learn about money matters when you’re discouraged from talking about them.
For those looking to improve their financial knowledge, Lowell has created a debt dictionary.