What does "financial literacy" encompass?

Financial literacy encompasses a broad range of abilities that enable individuals to understand and effectively use various financial skills. This includes knowledge in areas such as budgeting, saving, investing, understanding credit, and comprehending financial products such as loans and insurance. The ability to navigate personal finances is crucial for achieving financial well-being and making informed economic decisions that can impact one’s life significantly.

In contrast, focusing solely on budgeting personal expenses, understanding tax regulations, or knowledge of investment strategies represents only a limited aspect of financial literacy. While these elements are important, true financial literacy incorporates a comprehensive understanding of multiple financial domains to empower individuals to manage their personal finances effectively. Thus, the correct answer reflects the full scope of what financial literacy truly means.