Most investors are losing money on their savings due to general confusion about inflation and interest.
This is according to new research from AA Savings, which found that more than three out of four people do not know what AER stands for (Annual Equivalent Rate, which is used to express what interest rate is paid on savings).
Additionally, more than half of those asked were unable to calculate how much interest they would earn in a year from £100 with an AER of three per cent. That was even after they had been told what AER stands for.
Other findings showed that 68 per cent of savers said they would change savings accounts if they believed they were receiving a poor interest rate.
However, 61 per cent then admitted to not knowing their current rate of interest.
Speaking about the financial confusion, the director of AA Savings, Lloyd East said: "If people understood this better, they would be more likely to make sure they get the best return for their savings."
Other results in the survey revealed that 18 to 24-year-olds were 20 per cent less likely to get the answer to the AER question correct.
Commenting on this, Mr East said: "This survey shows an alarming lack of financial literacy among savers and it seems to be particularly true of young people."
He added: "Plain language and a straightforward account are vital if savers are to make informed choices that will give them the best returns."
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