What is financial literacy?

Financial literacy encompasses the ability to understand and effectively use various financial skills. It includes a broad range of knowledge necessary to make informed decisions about personal finance, such as budgeting, saving, investing, and understanding credit. This foundational knowledge empowers individuals to manage their financial resources wisely, navigate financial products and services, and make sound decisions regarding their financial future.

While several other options touch on aspects of financial behaviors, they do not encompass the entirety of what financial literacy entails. For example, spending money wisely, saving for emergencies, or knowledge about investing in the stock market represent specific components or outcomes of being financially literate, but they do not capture the full spectrum of understanding required for comprehensive financial management. Thus, the ability to understand and apply a variety of financial concepts and practices is central to the definition of financial literacy.