Financial literacy is the name given to education and understanding of various financial areas. These financial areas cover a wide range of topics related to managing personal finances, assets, money and investing. The field of financial literacy deals with the mechanisms through which an individual can manage his/her personal finance matters in an efficient way. Additionally, it includes the knowledge of making appropriate economic decisions about how to and where to invest. Similar fields like insurance, real estate, paying for college, budgeting, retirement and tax planning can also be included in this.
The different financial principles and concepts such as financial planning, compound interest, managing debt, profitable savings techniques and the time value of money are of top concern in the field of financial education. If there is a lack of financial literacy, making poor financial choices can have negative consequences on the financial well-being of an individual and the whole nation as well. For this reason, it has become important for the state to educate people by providing them with the necessary information about finances,
Financial literacy plays a huge role to help individuals become self-sufficient to achieve financial stability. Those who do understand financial affairs are able to make better decisions in comparison to those who don’t.