Financial literacy is possessing knowledge and skills pertaining to financial matters, such as budgeting, debt, saving and investing. To be financially literate is to have a strong grasp and understanding of the relationship between income, (money coming in from a job, dividends, etc.) expenses (unavoidable money going out such as rent, gas, food) and discretionary spending such as entertainment, eating out and travel.
Someone who understands how money works and how to make it work for them most likely will find themselves in a better financial position than someone who doesn’t. The comfortable feeling of financial stability that stems from financial literacy affords individuals with the ability to make big purchases confidently and possess the means to pay for expected expenses with ease.