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The components of financial literacy are personal finance, money management, borrowing, taxation and investing. It includes understanding how the financial system works and how you can use it to your advantage.
Personal finance includes how you manage your money, how you make purchases, what credit cards are best for you, what types of investments are good for you, and other similar topics. Money management is about budgeting your finances and saving for the future. Borrowing is about managing the borrowed money. Taxation is about paying and maintaining taxes along with profits. Investing is about knowing when to buy a stock or an ETF (Exchange Traded Fund) or a mutual fund.
Financial literacy is the ability to understand and manage money. It includes understanding the basics of money and how it works, as well as understanding when it is appropriate to save, spend and invest.
The first component is "Credit". This term refers specifically to money that we have earned through our hard work - this includes income from our own labor (wage) as well as from our employer.
Another component is budgeting which includes investing, saving, and spending the allocated budget.
The third component is managing identity theft and ensures proper safety and a secure environment
Financial literacy is the knowledge and understanding of money and financial matters. Financial literacy is not a single topic, but a broad concept that includes all aspects of money management, including personal finance, wealth management, investments and insurance.
It has various components such as:
- Budgeting which involves allocation and spending of budget for the relevant financial year
- Personal finance management which involves enhancing investment to the best possible use and decreasing the borrowings.
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