Mumbo Jumbo costing us £21 billion

The average adult pays £428 a year because they either don't read or don't understand terms used by financial providers, a survey for the Money Advice Service has found. Amongst the findings:

• 84% of people didn't read the full terms and conditions

• One in three people didn’t know what ‘interest’ means

• Two out of three couldn’t correctly identify the meaning of a ‘budget’.

• 46% of people couldn’t identify what ‘compound interest’ meant

• 44% didn’t select the correct meaning of ‘annuity’.

• Three out of five don't know EAR stands for Annual Equivalent Rate

• One out of three didn't know APR stands for Annual Percentage Rate.

• 15% didn't know the correct meaning of loan

Jane Symonds, a money expert at the Money Advice Service, said:

“Reading and understanding the terms and conditions of a financial product can seem long and unnecessary, but if you don’t, you may end up incurring unexpected penalties and possibly even impact your credit score.”

“There are many ways in which you can lose money by not properly understanding terms and conditions. Early repayment charges on loans and mortgages are a common financial headache, and many people fall foul of penalties for taking savings money out early from long term saving accounts, or incur late repayment charges on credit cards.”