A landmark study by The Richmond Project, the charity established by former Prime Minister Rishi Sunak and his wife Akshata Murty, has revealed that half of young people in the United Kingdom have a poor grasp of fundamental financial concepts such as inflation, compound interest, and risk diversification. The findings, drawn from the largest-ever numeracy survey of its kind in the country, underscore a troubling generational divide in financial literacy that could have long-term economic consequences.
The survey, which polled 10,000 adults across the UK, found that more than 50 per cent of those aged between 18 and 34 scored "poorly" or "very poorly" on a financial literacy test. In stark contrast, only 20 per cent of respondents aged 65 or older fell into the same categories. The research further revealed that adults over 55 with only GCSE-level education possess better financial skills than even postgraduates from younger generations. Specifically, 71 per cent of those aged 55 and older with GCSE qualifications achieved a "good" or "very good" score, compared with just 54 per cent of 18-to-24-year-olds holding postgraduate degrees.
Understanding the Core Concepts
The study tested respondents on three key financial concepts. Compound interest refers to how interest accumulates on loans or savings over time, effectively earning interest on interest. Inflation describes the erosion of purchasing power as prices rise, meaning the same amount of money buys fewer goods and services. Risk diversification explains why spreading savings across different types of assets—stocks, bonds, property—reduces overall risk rather than putting all eggs in one basket. Alarmingly, only 28 per cent of British adults answered all three questions correctly. This places the UK well behind other developed nations: Germany (53 per cent), Switzerland (50 per cent), the Netherlands (45 per cent), Australia (43 per cent), Canada (43 per cent), Finland (36 per cent), and the United States (30 per cent). Four in ten UK adults answered none or just one question correctly.
The age disparity is particularly stark. Among 18-to-24-year-olds, 52.74 per cent scored poorly or very poorly; for 25-to-34-year-olds, the figure was 50.71 per cent. In comparison, only 25.56 per cent of 55-to-64-year-olds and 20.34 per cent of those 65 and older performed at that level. Lizzie Gaisman, chief executive of The Richmond Project, hypothesised that older generations learned by doing—handling household budgets, managing savings accounts, and dealing with mortgages in an era before digital banking. Younger generations, flooded with online information and complex financial products, may face "less clarity" about the right course of action.
Gender Gap and Educational Implications
The research also uncovered a persistent gender gap. Men outperformed women across every age group, with the disparity widening sharply in midlife—from roughly 10 percentage points in early adulthood to 22 percentage points by ages 45 to 54. This suggests that women may be disproportionately affected by the lack of financial education, potentially leading to worse outcomes in retirement savings and investment decisions.
Rishi Sunak, who served as Prime Minister from 2022 to 2024, expressed surprise at the results but noted that older generations likely acquired financial skills through everyday life experiences. "We need to get away from this idea that some people are numbers people and some people aren't," he said. "Everyone with the right support and encouragement can be confident with numbers." The Richmond Project has endorsed the Government's commitment to integrating financial education into the primary and secondary school curriculum by 2028 and is actively assisting in developing core guidance.
The findings are the second phase of the charity's "Number Nation" study. The first phase, published in January, concentrated on numeracy rather than financial literacy and revealed that 40 per cent of British adults scored highly for numerical competence even though 60 per cent assessed their own abilities as high—a significant overconfidence gap. The latest results reinforce concerns that the UK is falling behind international competitors in equipping citizens with essential life skills.
Historical and Economic Context
Financial literacy has become increasingly critical in an era of high inflation, rising interest rates, and complex investment products. The Bank of England has faced repeated challenges in communicating monetary policy to a public that often misunderstands how inflation affects real incomes. For instance, many young people may not realise that if their savings account pays 1 per cent interest while inflation is 5 per cent, they are effectively losing purchasing power each year. Similarly, misunderstanding compound interest can lead to excessive credit card debt, as small monthly payments balloon over time.
Countries with stronger financial education systems, such as Germany and Switzerland, often start teaching money management in primary school. In the UK, financial education became part of the secondary school curriculum in 2014 but remains optional in many contexts. The Richmond Project's research suggests that even postgraduate education does not guarantee financial savvy, indicating that the issue is not merely about IQ or academic achievement but about practical, experience-based learning.
The charity's work aligns with broader efforts to improve financial resilience among Britons. The Money and Pensions Service has long advocated for early financial education, and the Treasury has commissioned reviews into the accessibility of financial advice. However, the current study highlights a pressing need for more targeted interventions, particularly for young adults who may be entering the workforce or taking on student loans without the foundational knowledge to make sound decisions.
Rishi Sunak and Akshata Murty set up The Richmond Project last year as their first joint venture after he left office. Named after his North Yorkshire constituency of Richmond, the charity aims to improve numeracy and financial literacy across the UK. During his premiership, Sunak pledged to make maths lessons compulsory until the age of 18, a proposal that did not come to fruition. The charity now works with schools, universities, and employers to develop new learning materials and training programmes.
Public First, the opinion research firm that conducted the survey for The Richmond Project, gathered responses from a representative sample of 10,000 adults. The data was weighted to reflect the national population. The study measures not just factual knowledge but also confidence and real-world application. Researchers found that many respondents who thought they understood inflation could not correctly answer whether a fixed sum of money would buy more or less in a year if inflation remained high.
Looking ahead, the Government has committed by 2028 to embedding financial literacy into the National Curriculum from primary school onwards. The Richmond Project is helping to draft guidance that will cover budgeting, savings, debt management, and investment basics. The hope is that by starting early, the next generation will avoid the gaps that plague current young adults. However, experts caution that simply adding lessons to the timetable may not be enough; teacher training, interactive resources, and involvement from financial institutions are also needed.
The results serve as a wake-up call for policymakers, educators, and parents. In a world where buy-now-pay-later schemes, cryptocurrency, and complex mortgage products are commonplace, understanding inflation and compound interest is no longer optional. As the study shows, ignorance carries measurable economic consequences—lower savings, higher debt, and reduced long-term wealth. The Richmond Project's findings may well shape the future of financial education in the UK for decades to come.
Source: The Telegraph News