The common use of jargon can make investments and pensions seem impenetrable and intimidating. If the thought of words such as ‘Equities’ and ‘Investment ISAs’ gets your heart racing, you’re not alone: new research1 has shown that financial terms really can make people feel anxious.
How can this be tested?
Researchers used a variation of the Emotional Stroop Test, which measures information processing speed when naming the ink colour of different words, to compare response times for neutral words like ‘pencil’ with investment-specific terms like ‘ISA.’
Nearly two-thirds of participants had slower response times and higher error rates for financial trigger words, suggesting stress reactions. Additionally, 44.3% experienced a raised heart rate and 11.5% reported an increase in breathlessness.
The terms ‘Stockbroker’, ‘Asset Manager’ and ‘Investment Risk’ produced three of the slowest reaction times. Other investment-related words like ‘Bond Fund’ and ‘Equities’ also took longer than average.
Don’t have a fear of finance
Stripping back jargon can help people think more clearly about investments and pensions. In supporting research, Barclays found that 71% of respondents don’t feel confident enough to invest money in the stock market, with a quarter feeling ‘frightened’ by the idea.
Despite these fears, people do want to improve their financial knowledge, with three in five participants keen to learn more about financial terminology. We can relieve the stress of investments and pensions – and take the fear out of financial planning!
The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.