What is meant by 'financial literacy'?

Financial literacy encompasses a broad range of skills and knowledge essential for managing personal finances effectively. The correct answer highlights that it involves understanding and applying various financial skills, such as personal finance management, budgeting, and investing.

Having a solid foundation in these areas allows individuals to make informed decisions about their finances, allocate resources efficiently, and plan for future financial goals. The ability to manage a budget, for example, is crucial in ensuring that expenses do not exceed income, while knowing how to invest wisely can help grow wealth over time.

While saving money, calculating interest rates, and recognizing investment opportunities are important components of financial management, they are more specialized aspects of financial literacy rather than its complete definition. Financial literacy encompasses a more comprehensive understanding of how different financial concepts interrelate and how they can be effectively applied to achieve financial stability and success.