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Despite the booming property market and a surge in buyers, nearly half of Australians are financially illiterate, with property-related financial terms being the most misunderstood.
A new report by BrokerChooser showed that about 8.5 million Australians are considered financially illiterate and have been losing over $7,000 each year.
According to the analysis, equity has been the most misunderstood financial term in Australia, with 8,300 searches for the definition each month.
Similarly, the concept of equity has been confusing worldwide, with an average of 247,100 monthly definition searches globally.
Head analyst from BrokerChooser, Adam Nasli, said that the concept of equity has been misunderstood due to its broader usage across different financial markets.
“Equity is the amount an owner would retain if they sold an asset or business, after settling any debts tied to it,” Nasli said.
“In simple terms, it’s the value you truly own. For example, if you own a house worth $300,000 and you owe $200,000 on the mortgage, your equity in the home is $100,000.”
Nasli said that in the stock market, equity means ownership in a company, typically through shares that offer voting rights and profit shares, reflecting the value left after subtracting liabilities from assets.
In total, the report analysed the top 10 financial words that baffled Australians the most.
Following equity, exchange traded funds (ETF) saw 5,890 monthly research, while gross domestic product (GDP) rounded up the top three with 4,500 monthly definition research.
Two other property terms, yield and arrears, completed the top five with 2,950 and 2,600 monthly definition searches in Australia.
Nasli said yield continues to be misunderstood worldwide, accounting for 88,250 monthly definition searches globally.
“Yield represents the income return on an investment. It reflects how much income an investor can expect to receive from interest payments, dividends, or other distributions relative to the price paid,” he said.
“Higher yields generally come with higher risk, while lower yields tend to indicate safer, more stable investments.
“A clear understanding of yield helps investors to assess the attractiveness of different assets and make well-informed decisions based on their income goals and risk tolerance,” he said.
Additional misunderstood financial terms include correlation, annuity, principal, capital and annual percentage rate.
Nasli urged Australians to improve their financial literacy, warning that misunderstanding terms like yield, ETF, or equity can lead to costly errors, from underestimating risks to missing out on long-term, wealth-building opportunities.
“Financial literacy is no longer just a nice-to-have skill – it’s essential,” he said.
“Ultimately, understanding these fundamentals can be the difference between financial strain and sustainable wealth growth.”
Additionally, he said that with AI now in the hands of fraudsters, Australians must boost their financial skills to manage money wisely and avoid sophisticated scams.
“It’s not about becoming an expert overnight, but rather building the foundation needed to make sound decisions, ask the right questions, and stay one step ahead,” Nasli concluded.
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