Financial literacy combines financial, credit, and debt management knowledge that is necessary to make financially responsible decisions—choices that are integral to our everyday lives.
Financial literacy includes paying off debt, creating a budget, and understanding the difference between various financial instruments. In sum, financial literacy has a material impact on families as they try to balance their budget, buy a home, fund their children’s education, or ensure an income for retirement.
A lack of financial literacy affects people in advanced economies as well as economically emerging or developing economies.
Though financial literacy may vary with education and income levels, research shows that highly educated consumers with high incomes can be just as ignorant about financial issues as less-educated, lower-income consumers (though in general, the latter do tend to be less financially literate).
At the same time, for many people, thinking about personal finances is often anxiety-inducing. People reported that choosing the right investment for a retirement savings plan was more stressful than a visit to the dentist, according to studies.
