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!