Millionaires make knowing about money a priority

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Proof that understanding finances can help people get richer has been revealed in new research.

This financial literacy also leads to positive behaviours such as saving for a rainy day, the survey reveals.

The research shows that the most knowledgeable investors about finances tend also to be the richest with 40% of people worth between £3.2 million and £16.2 million describing themselves as being ‘very knowledgeable’ when it comes to investing.

That response falls to just 11% for non-millionaires who have up to £650,000 to invest.

Rich people say that working with an experienced financial advisor is one of the primary benefits as it helps to increase knowledge and understanding.

Wealth of knowledge

The survey also reveals that this knowledge also helps rich people prepare more effectively for their retirement.

In addition, 81% of the same group claims to be ‘well informed’ about how social security benefits work and when they are likely to begin receiving their state pension.

This same group of respondents are also the most likely to delay their retirement in order to maximise their retirement income.

However, investors who say they have little knowledge of finances say they are well informed about the timing of their social security benefits.

The Spectrem’s Millionaire Corner survey also asked rich people what they thought of their investments before and after the recent financial crisis.

The richer, and more knowledgeable investors, said they did not regret their investment decisions in the years before the crisis struck.

Unlike non-millionaires, who said they wished they had saved more, which had a 45% response, and 20% wished they had not taken on so much debt.

Indeed, around one-in-five of the less rich investors wished they had done more to research their retirement options and to utilise more tax-efficient savings schemes.

Financial status

A similar theme was echoed by rich investors whose biggest regret is not having been more conservative in their investment approach, which had a 23% agreement, but fewer, around 4%, had worries over the scale of their debt, and only 12% wished they had saved more.

Only 4% said they wished they had spent more time investing for their pension provision (4%).

The survey’s results are underlined by Richard Ketchem, the chief executive of the Financial Industry Regulatory Authority which has also undertaken a survey about peoples’ financial capabilities.

He says there is a strong correlation between a person’s financial behaviour and their wealth status.

Their survey found that people who understood the investment-making process were the most likely to have established a rainy day fund and less likely to use credit cards with high interest rates and fees.

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