What is financial literacy?

Financial literacy encompasses the knowledge and skills required to make informed and effective decisions regarding personal finances. It involves understanding various financial concepts, such as budgeting, saving, investing, and managing debt, and being able to apply that knowledge in real-world situations. This capability allows individuals to navigate financial challenges and opportunities, ultimately leading to better financial health and stability.

The other options, while related to aspects of finance, do not capture the broader scope of financial literacy. Preparing tax returns involves specific tax knowledge rather than an overall financial understanding. Obtaining a mortgage certainly requires financial knowledge, but it is not synonymous with financial literacy itself; many aspects of financial literacy extend well beyond the housing market. Finally, stating that financial literacy is only a skill needed by financial planners overlooks its importance for everyone, regardless of their profession or financial situation. Hence, option B accurately depicts the comprehensive nature of financial literacy.