Financial literacy is the ability to understand and manage your money effectively. It involves knowing how to budget, save, invest, and make informed decisions about spending. By being financially literate, individuals can avoid debt traps and make choices that lead to financial stability and growth. Having strong financial literacy skills can empower people to plan for their future, whether it's saving for a house, education, or retirement. It also helps in understanding important concepts like interest rates, credit scores, and insurance, which are essential for making sound financial decisions throughout life.