What does it mean to have financial literacy?

Having financial literacy primarily means the ability to effectively manage personal finances. This encompasses a range of skills and knowledge necessary to make informed financial decisions. Individuals who are financially literate can budget their income, save money, understand credit and debt, and make informed choices about spending and investing.

This foundational competence allows people to navigate various financial challenges, such as handling expenses, planning for emergencies, and determining the best ways to save for the future. It empowers individuals to assess financial products, such as loans and insurance, and understand the terms and risks associated with them, leading to better long-term financial health.

The other options reflect different facets of finance but do not capture the broad and practical essence of financial literacy. Understanding complex economic theories might be relevant in certain discussions but does not directly translate to managing personal finances. Professionally preparing tax returns requires specialized knowledge but isn't necessary for personal financial management, which can often be handled without extensive professional training. Similarly, while investing is a component of financial literacy, it is not limited to stock market investments alone; financial literacy encompasses a wider array of fiscal competencies.