The Government-back Money Advice Service (MAS) said four out of five adults admitted they did not read the full terms and conditions before taking out financial products like savings accounts, credit cards, loans, insurance policies and mortgages.
A survey of 3,000 people also found that misunderstanding of key financial terms was widespread.
Nearly 50 per cent did not know the meaning of compound interest – when interest is earned on interest which has already been accrued.
More than 40 per cent did not know that an annuity was an annual income bought with pension savings.
Nearly a third failed to identify that APR was the acronym for annual percentage rate.
Jane Symonds, a money expert at the MAS, an independent body set up by Government to offer financial tips, said: “Reading and understanding the terms and conditions of a financial product can seem long and unnecessary but, if you don’t, you may end up incurring unexpected penalties and possibly even impact your credit score.
“There are many ways in which you can lose money by not properly understanding terms and conditions. Early repayment charges on loans and mortgages are a common financial headache, and many people fall foul of penalties for taking savings money out early, or incur late repayment charges on credit cards.
“Our financial decisions can be life-changing, and if you misunderstand what you’re signing up to, it could haunt you for many years to come.”
The average estimated annual loss incurred by those who took part in the survey was £428.
Consumers in Northern Ireland believed they had lost the biggest amount over the last year, at £1,014 typically, followed by people in London, who gave an average estimate of £878. In Scotland, the average amount people thought they had lost out on over the last year was just below the UK average, at £384. Respondents in Yorkshire were among the most savvy, estimating their losses at an average of £169 a year.
Meanwhile, people taking out payday loans tended to think they had suffered more than three times the average financial loss of the population by not getting to grips with the small print.
Some 452 people surveyed said they had taken out a payday loan in the past and estimated the average annual cost they had incurred by not reading or understanding financial terms and conditions properly was £1,405.
The survey results were revealed as new figures showed the number of people struggling to cope with payday loan debts has risen by more than 13,000 in the past year.
Debt charity StepChange said it dealt with 43,716 people in the first six months of this year, compared with 30,762 for the same period last year.
It said it had handled more than £72 million in debts in the first half of 2014, highlighting the need for further action to ensure better protection for vulnerable people who might consider taking a loan.
In July the Financial Conduct Authority announced proposals to introduce a cap on the fees and interest charged by payday lending firms in a bid to protect borrowers from escalating debts.
The proposals, which are due to come into force next year, include default fees capped at £15 and a limit of 0.8 per cent per day on interest on unpaid balances.