What does “financial literacy” mean?

Financial literacy encompasses a broad understanding of various financial skills that are essential for making informed and effective financial decisions. This includes not only investment decisions but also budgeting, saving, understanding credit, managing debt, and grasping the implications of financial products and services. Being financially literate means one can comprehend and navigate various aspects of personal finance, enabling individuals to improve their financial well-being and manage their resources effectively over time.

Although making investment decisions, knowing tax regulations, and minimizing personal debt are all important components of financial health, they are more specific skills or knowledge areas rather than the overarching definition of financial literacy itself. The essence of financial literacy lies in having a comprehensive understanding that allows an individual to engage with all aspects of their financial life.