The average person in Britain has a poor understanding of many aspects of personal finance, according to research.

In particular, we grossly underestimate the cost of big life events such as having children, going to university and retiring.

The average person thinks that it costs just pound;50,000 to raise a child from birth to leaving home, when one study puts the actual figure at pound;229,000.

Similarly, we think the average debt for a student coming out of university is only pound;21,000, when the actual average owed is more than pound;44,000.

And, perhaps most worryingly, the average person thinks they only need to have a pension pot of pound;124,000 to get an annual income of pound;25,000 per year, including their state pension. A quick check of any pension calculator shows that is woefully short, and most people will need well over pound;300,000 (taking receipt of the state pension into account).

Related: The price is wrong: survey exposes lack of personal finance knowledge in UK

And these averages mask many who are much further out. Three in 10 people think that to get a total annual income of pound;25,000 they need less than pound;50,000 in their pension pot – which would actually provide well under pound;10,000.

And one of the most worrying findings from the study is that we think under-saving for retirement is a very widespread norm: we think two-thirds of people are saving too little, when government estimates suggest only 43% of us are. This is important, as we know our perception of what is “normal” is a powerful influence on our own behaviour.

The purpose of the poll is not just to raise a wry smile at our collective ignorance. This matters: studies show that low financial capability has the equivalent effect on life satisfaction to being unemployed if you’re a man and to divorce if you’re a woman.

And it’s an issue that will only grow in importance as more aspects of financial support are de-institutionalised. For example, the burden of calculation and risk for final salary pensions sat very much with employers – but as these schemes close, this burden shifts to individuals with the onus now on them to work out what they need.

So the necessity for better financial decision making is clear. There are two broad approaches to helping people with this: directly teaching us more to increase our knowledge, and making it easier to get to the right decisions by changing what is offered to us and how.

On the first of these, there is a clear benefit to increasing our financial knowledge. Studies show the straightforward sequence – greater knowledge leads to better planning, which in turn leads to better outcomes. In one study, getting one additional financial literacy question correct is associated with a higher probability of planning for retirement, while those who planned saved three times as much as those who didn’t.

And some moves are under way to help increase our financial skills and knowledge – in particular, financial literacy was made a mandatory element of the national curriculum for the first time in this school year. This is an important step, as we need to start much younger and normalise financial education. But it is largely symbolic – studies suggest school-based financial training has limited impact on its own, not least because it is hard to make the content current and relevant when the big decisions will come later in life.

Much more effective is more tailored and targeted interventions, such as a nine-month scheme for social housing tenants run by Citizens Advice trainers, which saw impressive results in increasing saving levels and broader financial resilience.

It is worth saying that these challenges are much more acute for the less well-off. There is now a compelling body of work that shows the poor stay poor not because of any inherent personal deficiency – instead cause and effect works the other way round: once someone is poor, the constant worry impacts on a number of other aspects of life, which leads to worse decisions. As academics would say, poverty constrains their “cognitive bandwith”.

But this sort of tailored training is expensive, and will not reach al, so we also need to find smarter ways to intervene when decisions are actually being made – an approach that the financial services industry itself can play a key part in. For example, when time is scarce and attention limited, very simple actions can change behaviours: an experiment in Peru, Bolivia and the Philippines showed that customers who received a reminder text message from their bank to encourage deposits saved significantly more than those who did not.

Our ignorance of the financial facts of life highlights a growing practical challenge to good decision making and important outcomes for people. We need help, but this cannot be just in the classroom, it needs to work with the grain of our actual behaviour and use all opportunities to help us make better financial choices.

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