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Quiz: do you know your money jargon?

Getting to grips with financial jargon is no easy task, and that’s worrying when financial decisions are some of the most important we make. Test yourself in our quiz to see how much money jargon you know…

In January our Money team quizzed over 1,000 people on their knowledge of common financial terms. The results? Let’s just say perhaps some banks need to do more to improve their customers’ understanding of key financial terms.

For example, only a third of people understood the term ‘account buffer’, but this doubled when explained in jargon-free language. And to add to the confusion, one insurance company used the Latin term ‘terra firma’…

How much of the jargon do you understand?

Our test below consists of 10 questions on common financial jargon, so give it a go and see if you’re up to speed. Good luck! We’ll let you know the answers next week.

1. In banking, what is EAR?

(a) Interest earned over a year
(b) Representative interest rate describing interest paid for staying overdrawn for a year, excluding fixed fees
(c) Amount paid for staying overdrawn for a year

2. What is AER? 

(a) The monthly interest rate on positive balances in your account
(b) Representative interest rate describing interest earned over a year, taking into account how often the interest is paid and the effect of compounding
(c) The amount you can spend once your authorised overdraft has been spent

3. What is a ‘fault claim’ in insurance

(a) No one is at fault
(b) Either you’re at fault or your insurer can’t recover costs from anyone else
(c) You’re at fault

4. What is an ‘ex gratia payment’ in insurance? 

(a) Optional upgrade payment by the policyholder
(b) Any optional payment made by the insurer
(c) Payment by an insurance firm on a successful claim

5. What’s an insurance ‘excess’? 

(a) The difference between payout and claim
(b) The fee for a policy upgrade
(c) The first amount of a claim the customer has agreed to pay as a part of their policy

6. What is ‘no-claims bonus protection’? 

(a) A bonus discount if you haven’t claimed
(b) It ensures you won’t pay an increased premium when you make claims
(c) It protects your no-claims bonus if you make fewer than a certain number of claims

7. What is AMC? 

(a) The total amount of charges levied by fund managers
(b) The commission earned by fund managers
(c) The charge levied by fund managers to cover ongoing management only

8. What is an OEIC?

(a) Fund focusing solely on investing in government bonds
(b) Investment company or fund which may adjust investment criteria and fund size
(c) Fund focusing on emerging market investments

9. In investments, what are ‘equities’?

(a) A debt owned by an investor which can be traded as an asset
(b) An investment fund
(c) Shares in a company

10. Can you work out the effect of the terms in the following banking scenario? 

Catherine has an interest-free and fee-free Formal Overdraft of £500. She has a daily Informal Overdraft Usage Fee of £5 and an Account Buffer of £10. On Monday her account balance is zero – she buys a new laptop for £500 and some food for £5. On Thursday her salary of £3,000 is paid into her account.

Which of the following statements is true?

(a) Catherine’s bank will charge her £15
(b) Catherine’s bank won’t charge her anything
(c) It’s impossible to know how much she will be charged

So write your answers below and we’ll let you know the answers next week. And try not to look at others’ answers until you’ve done yours!

Comments
Member

Given there is no surrounding context I think it is a little difficult to expect anyone to get a decent score. Even more so if one does not have bonds/funds, or an overdraft and have your interest off-set between you accounts.

I am not at all convinced this quiz will prove anything.

Member

Many of us will have a DMF in our car but unless there is a problem we will be happy ignorance of what the acronym means.

” Let’s just say it’s worth some people spending a little time brushing up on the jargon.”

My previous post was suggesting that not knowing some acronyms is not a sign of financial incompetence. Simply you have not the need to know at this point in time. Making readers feel inadequate about this “lack” is not helpful.

This is a helpful article:
http://www.which.co.uk/money/savings-and-investments/guides/different-types-of-investment/are-fund-charges-eating-into-your-returns/

Member

Hello Diesel, it’s just a bit of fun for the community 🙂 We weighed up whether to provide some useful links for revision on this quiz, but decided against to see whether people would like to do it blind.

I’ll go first! C, B, B, A, C, A, B, C, A.

A fair few of those were guesses. Let’s see how I do…

Member

I am glad it is a light-hearted quiz. Perhaps the comment on people who were tested in January needing to brush up on their jargon needed a smiley. : )

Member

Fair point, it does sound a little mean 😉

Member

Hi Diesel, you’re right it does come across a bit harsh – I’ve given it a little tweak 🙂

Member

Badly. Wear the dunces’ hat Patrick.

Member

Holds head in shame 🙁 Somebody had to get you guys going! It’d be no fun if I got them all right 😉

Member

We know your strategy by now. 🙂 Now how about a quiz about something more interesting than financial jargon.

Member

Haha, maybe we can do a quiz about me. You all seem to know too much about me… my disgust of mayo, my love of phone battery life…

Member

Back to money jargon – should we have to know all of these terms to understand what’s being done with our money? Shouldn’t it be more common sense?

Member

I think the best we can hope for is a clear explanation of financial jargon and some organisations do this much better than others.

It’s like instruction manuals, which we are discussing in another Convo. Some are clear and others leave a lot to be desired.

Member

I’ve had a blind go at this:b,b,b,b,c,c,c,b,c,b.
However, if you don’t understand something then look it up or ask. No point in guessing if it is important.

Member

My entry is B, B, B, B, C, C, C, B, C, B.

The answer to Q10 is a bit of a guess. Catherine is a silly girl spending £500 on a laptop rather than waiting until she was paid four days later.

Member

Might have been on special offer, wavechange. At least she had an “authorised overdraft”. Hope she isn’t economising on food – £5 doesn’t buy much and she presumably had no cash. A bit precarious.

Member

I see we have the same answers, Malcolm. I wrote mine on the back of an envelope yesterday, so I’m not cheating.

My approach with financial matters is to assume the worst, though as you say it’s best to check anything you are unsure of.

I guess Catherine did her food shopping in Aldi or Lidl.

Member

I agree with you, though as you say, 10 probably should be B, but knowing some banks…

Member

I think 10 is “C”, as she might have paid cash for the items!

Member

Mine was as below and done without research before I posted.
a,a,c,b,c,c,b*,c*,c,c

As for 10. there is nothing to say that she did not use cash, a cheque, or a credit card, which she clears monthly by DD from her current account. Paying by credit card makes the most sense for the computer. Cash for the food due to speed of transaction.

Those with the asterisk are really big guesses.

Member

Woah, this quiz is tough… I really need to brush up on my financial jargon!

Member

Just start off by eliminating the answers that are not correct or don’t look probable and you will find it a lot easier, Andrew. Put yourself in the place of Harry, who has set the test. He has had to come up with some plausible but incorrect answers. Sometimes it is quite difficult to produce plausible ‘distractors’ when setting a multiple choice test.

Member

I’ll give it a shot later on today, wavechange – thanks for the advice! The ankle must be nearly mended now?

Member

Thanks Andrew. I am indeed just about mended. I’ve still got to try on some Which? recommended walking boots.

Member

I used to find walking into somewhere like Millets and trying them on before buying…however, we’re lacking a local branch in Hertford these days.

Member

Here’s my stab at the quiz : a., b., c., b., c., c., a., b., c., c.. Some are guesses. I am expecting to invoke the Eric Morecambe defence.

Member

How can we possibly answer number 10 without knowing how she paid?

Member

Maybe why that’s why there is answer C.

Member

My answers: abbbc cabcc

Member

If there are any bits of jargon that none of us get right, I suggest the relevant regulator bans that term from all marketing and customer correspondence.

Member

I can understand why it is mandatory for the advertising of certain financial products to carry explanations, or warnings, or illustrations of potential outcomes. However, the financial services sector seems to be allowed to meet these obligations in a very unsatisfactory manner, almost to the point of denial in some cases. While advertisements in print media may include the necessary text, it is usually printed in a deliberately hard-to-read form with minimsed, compressed or feint lettering and with unfamiliar abbreviations. At least one can study the printed document, with a magnifying glass if necessary, and take time to decipher it. With adverts appearing on television, the companies seem irked that they have to include essential customer information on the screen at all [I suppose it spoils the aspirational images they have created at great expense]; with a 20 second commercial the text is usually on-screen for too short a time to read, is in white on a pale background, and is in a compressed typeface containing strange words and abbreviations. I find it surprising that the regulators consider these techniques to be acceptable, and I question whether we should trust the companies that do it. Even the banks that claim to give us “Xtra”, or want to showcase their “helpful banking”, or are “there for the journey”, have had a communication by-pass when it comes to clear presentation.

I still don’t know what “7% representative” means when I hear it in radio adverts.

Member

I finally got round to answering this quiz…. Here’s my answers: B, B, B, B, A, C, C, C, A, C (some guessed, of course…).

Member

I am unable to take part in the quiz as I have already done so in the Which? Magazine so you will have to take my word for it that there were just a couple of jargons I was not familiar with. Question 10 took quite a while to fathom and I eventually came up with the following explanation. However, I stand corrected if wrong.

As Catherine already had a £500 formal interest free and fee free overdraft arrangement she could quite happily go ahead with her laptop purchase without incurring penalty. However, her daily overdraft usage fee of £5 per day paid in on Monday Tuesday and Wednesday amounted to £15 but as she already had a fee free overdraft arrangement this amount would be held in her account and tide her over until Thursday. Her £10 Account Buffer to prevent unauthorised overdraft would however be held back by the bank leaving her £5 in credit to spend on lunch. The £3000 credited to her account on Thursday would amply cover the agreed £500 overdraft so her bank would not charge her anything.

Quite a savvy lady I would say and probably a bank employee, but not something I could embark upon being of a more cautious nature. It is hoped her bank does not deduct two monthly DD payments, one at the beginning and another at the end of the same month as my bank has been known to do on occasion as the £10 Account Buffer would be far from adequate for someone of Catherine’s buy now pay later spending habits I would think.

Member

We’ll announce a winner tomorrow… fingers crossed it’s me! 😉