Financial literacy is the possession of knowledge, skills, and behaviors that enable individuals to make informed and effective decisions about managing money. It includes understanding key financial concepts such as budgeting, saving, investing, borrowing, and managing debt
. Key aspects of financial literacy involve:
- Creating and following a budget to control spending and meet financial goals.
- Saving money, including setting up emergency funds and planning for future expenses.
- Managing debt responsibly to avoid excessive borrowing and financial distress.
- Understanding investment principles like diversification and risk management.
- Recognizing financial risks, including fraud and cyber threats, to protect personal finances
Financial literacy empowers people to plan for the future, make better financial decisions, and improve their financial well-being and resilience. It also helps reduce vulnerability to financial fraud and over-indebtedness
. In summary, financial literacy is the foundation for managing personal finances wisely, ensuring economic stability, and achieving life goals such as retirement planning and education funding
