Which of the following best describes financial literacy?

Financial literacy is fundamentally about understanding and effectively using financial skills. This includes a range of competencies, such as budgeting, saving, investing, understanding credit, and making informed decisions regarding personal finance. Financial literacy equips individuals with the knowledge they need to manage their personal finances effectively, enabling them to navigate various financial situations—be it securing a loan, investing for the future, or simply managing day-to-day expenses.

The other options do not capture the full scope of what financial literacy entails. The ability to earn maximum income focuses narrowly on income generation without considering the management and strategic use of that income. Knowing only how to save money is too limited, as financial literacy involves not just saving but also investing and understanding debt. Expertise in corporate finance pertains to a specialized area of finance that may not be relevant to personal financial management, which is the core of financial literacy. Thus, understanding and using financial skills effectively represents the most comprehensive description of financial literacy.