Financial literacy is defined as understanding how to manage money effectively. Financial literacy is the knowledge and skills to make informed decisions regarding money matters. Financial literacy helps an individual fulfill personal, family, social and governmental responsibilities.
What does it mean to be financially literate? It means that you know basic money principles. You understand financial principles such as interest rates, risk and return, credit management, guaranty, banking, insurance, time value of money and taxes.
Everything else being equal, people who are financially literate are more likely to achieve their financial goals than people who are not financially literate. Financial literacy can help people buy a home, save money for emergencies, afford college tuition, start a business, and live comfortably in retirement.
On the other hand, a lack of financial literacy can be harmful. Financial illiteracy can subject an uninformed person to excessive debt, predatory lending, misleading investments, unreasonable interest rates, and other deceptive practices.
Taken From: Jodi George Financial Education Council
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