What does financial literacy primarily enable an individual to do?

Financial literacy primarily enables an individual to apply reasonable and emotionally sound money management strategies. This foundational skill allows individuals to navigate their financial lives more effectively, making informed decisions regarding budgeting, saving, spending, investing, and planning for the future. By understanding financial concepts and principles, people are empowered to create and manage their personal budgets, develop savings plans, and make choices that align with their long-term financial goals.

While financial literacy may involve an understanding of financial regulations and the risks associated with investments, its core purpose is to equip individuals with the tools necessary to manage their finances wisely and confidently. This means making choices that reflect a balance between emotional responses to money and rational strategies that promote financial health. Being financially literate helps individuals avoid pitfalls like impulsive spending or over-leveraging themselves through high-risk investments, thereby fostering a more stable and secure financial future.