What is Financial Literacy? Understanding Needs vs. Wants

Financial literacy is the ability to understand and effectively use financial skills, including budgeting, saving, and investing. A key concept is distinguishing between needs and wants. Needs are essential for survival—like food, shelter, and healthcare—while wants are non-essential items that enhance comfort or pleasure, such as dining out or luxury items. Understanding this difference helps individuals prioritize spending, make informed decisions, and avoid debt. Financially literate individuals are better equipped to plan for the future, set realistic goals, and manage their resources wisely. This foundational knowledge promotes long-term financial well-being and economic stability.