Financial literacy is the ability to understand and effectively manage personal finances. It encompasses a range of skills and knowledge, including:
Budgeting: Knowing how to create and stick to a budget to manage income and expenses.
Saving: Understanding the importance of saving for emergencies, retirement, and other goals.
Investing: Learning about different investment options (stocks, bonds, mutual funds) and how to build a diversified portfolio.
Debt Management: Knowing how to manage and reduce debt, including understanding interest rates and repayment plans.
Credit: Understanding credit scores, reports, and how they impact borrowing.
Financial Planning: Setting short- and long-term financial goals and creating plans to achieve them.
Insurance: Knowing what types of insurance are necessary to protect assets and manage risks.
Improving financial literacy can lead to better decision-making and increased financial stability.