How does financial literacy benefit economic decision-making?

• A. It provides knowledge on credit only
• B. It limits choices to conservative investments
• C. It equips individuals with skills to make informed financial decisions
• D. It increases reliance on financial advisors

Answer: (C)

Financial literacy significantly enhances economic decision-making by equipping individuals with the necessary knowledge and skills to make informed financial decisions. This encompasses understanding budgeting, saving, investing, managing credit, and recognizing the implications of financial products and services. Possessing financial literacy empowers individuals, allowing them to evaluate their options critically and choose pathways that align with their financial goals and aspirations.

For example, a financially literate person can analyze the risks and benefits of different investment opportunities, which could lead to better savings and wealth accumulation over time. Instead of relying heavily on others to make financial decisions, these individuals can independently assess their financial situations and come up with strategies that suit their needs.

The other choices present narrower perspectives that do not capture the full essence of financial literacy. Limiting knowledge to credit or focusing solely on conservative investments restricts the broader understanding of a diverse financial landscape. Moreover, becoming overly reliant on financial advisors diminishes the personal empowerment that comes from being financially literate, as individuals should ideally be able to make educated decisions without depending solely on external expertise.