What is meant by financial literacy?

Financial literacy refers to the ability to understand and effectively use various financial skills and concepts. This encompasses a wide range of topics, including budgeting, saving, investing, credit management, and understanding financial products such as loans and insurance. A person who is financially literate is equipped to make informed and effective decisions regarding their personal finances, which can lead to better financial stability and security.

By being financially literate, individuals are more capable of evaluating financial opportunities, planning for the future, and managing risks associated with their financial choices. This foundational skill is crucial in today’s complex financial landscape, where individuals are often required to navigate various financial instruments and make informed decisions about their money.

In contrast, the other options focus on narrower or unrelated aspects. Reading and reporting financial news is more about media literacy than personal finance. Knowledge of advanced financial theories does not necessarily help an individual make practical decisions regarding their finances. Managing a business effectively may require financial knowledge, but it is a specific skill set that does not encompass the broader aspects of personal financial literacy.