Do you know your APR from your elbow? Confusing terms and conditions cost us £428 a year but financial education in schools should help the next generation

Simon Read discusses the introduction of personal finance lessons in the new school curriculum.

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The Independent Online

Do you understand financial terms and conditions? Or even bother to read them? Failing to do so could be costing you a packet.

In fact a typical consumer could be losing £428 a year, reckons the Money Advice Service, after it surveyed 3,000 of us.

And those forced to resort to payday loans are hardest hit by not getting to grips with the financial small print. They estimated that the average annual cost they had incurred by not reading or understanding financial terms and conditions properly was £1,405.

Among those who had taken out a payday loan, two-thirds could not identify what APR stands for while, shockingly, nearly a fifth believed that when someone takes out a loan, there is no obligation to pay it back.

Jane Symonds of 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.”

Nearly half of those surveyed did not know the meaning of compound interest, while a similar amount did not understand the term annuity.

"There are many ways in which you can lose money by not properly understanding terms and conditions,” warned Ms Symonds. “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, or incur late repayment charges on credit cards.

"Our financial decisions can be life-changing, and if you misunderstand what you're signing up to, it could haunt you for many years to come."

The findings come as financial education is being placed on the national curriculum in secondary schools in England this week.

It is hoped the move will lead to a generation that understands finance better and is better equipped to avoid the debt disasters that hits millions of people every year.

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