Financial literacy is the ability to understand and effectively use various financial skills, including budgeting, saving, investing, and managing debt. A key component of financial literacy is learning to distinguish between needs and wants. Needs are essentials required for basic living, such as food, housing, clothing, healthcare, and transportation. Wants, on the other hand, are non-essential items or services that enhance comfort or pleasure—like designer clothes, luxury cars, or frequent dining out. Recognizing this difference is crucial for making responsible financial decisions, especially when budgeting or trying to save money. By prioritizing needs and managing spending on wants, individuals can avoid debt, build savings, and achieve long-term financial goals. Developing this awareness early on forms the foundation of smart money habits and contributes to financial stability and independence. In short, financial literacy empowers people to live within their means and make informed choices that support their future well-being.

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.