What is Financial Literacy?

From the Financial Consumer Agency of Canada (FCAC)

Financial Literacy as the ability of consumers to make informed decisions that will best suit their situation.

A financially literate person is someone who understands how the financial system works, how to manage their money and how to make choices that best suit their needs and income. A financially literate population helps build a strong economy, which in turn makes all our lives better.

From the Investor Education Fund:

Financial literacy is the set of skills and knowledge that allow you to understand:

• The financial principles you need to know to make informed financial decisions, and
• The financial products that impact your financial well-being

This means

• Understand the key financial products you may need throughout your life – including bank accounts, mortgages, retirement savings plans and basic investments like stocks, bonds and mutual funds
• Understand basic financial concepts like compound interest, investment return, risk, diversification and so on
• Discuss money and financial issues – even if you don’t really like to talk about them
• Make good financial choices about saving, spending and managing debt throughout your life: for example, when getting an education, starting a job, buying a house, starting a family, getting ready to retire and living out your senior years
• Respond competently to changes that affect your everyday financial well-being – including events in the general economy like the recent collapse of financial markets, rising unemployment and the threat rapid inflation.