Marvin OnumonuResearch from Aviva found 24% of adults said they did not understand why inflation matters for savings and investments, with women (32%) twice as likely as men (16%) not to know.
Nearly two thirds (63%) said they had good financial knowledge, and more than half (56%) said they understood inflation, but 73% did not, or only vaguely, understand why it’s important to know about inflation.
45% said they did not know how the monthly rate of inflation is worked out, with this much higher for women (59%) than men (30%).
One in five (22%) thought inflation can only go up.
50% said they did not know how the consumer price index is calculated, rising to 62% among those aged 60-64.
One in eight (12%) thought inflation does not affect their savings, and a further one in six (17%) were unsure.
This was highest among people aged 45 to 49 (27%).
More than one in five (22%) thought inflation only affects the price of certain goods like groceries.
27% who rated their knowledge of inflation as good were wrong in thinking it only affects certain goods.
Nearly a third (31%) said their knowledge of inflation had improved in the past two years, mainly from following the news and seeing prices go up.
Men were nearly twice as likely as women to spend time researching inflation (36% and 19% respectively).
A third (32%) said they felt more confused about inflation than two years ago, rising to half (50%) of those aged 18 to 24.
Of those who felt confused, a quarter (25%) said it was because the media talked about inflation as if everyone already knew what it was.
23% said they heard mixed messages and saw prices rising but did not know why.
Alistair McQueen, head of savings and retirement at Aviva, said: “Inflation can be a tricky topic to fully understand.
“However, it has a large impact on our own everyday finances, such as wages and the price of things we buy, so it’s a big factor to consider in terms of your own investments and savings.
“This is why it’s concerning to see the knowledge gaps the nation has around inflation and the influence it can have.”
McQueen added: “There are many tools and calculators that can help provide an overview of how your savings or investments could be affected by inflation.
“While they shouldn’t be relied on for financial decisions, on their own, they are helpful to use to get an idea of the potential long-term impact on your investments and savings.”
