Know the Difference between Financial Literacy and Financial Management
28 April 2025
Knowing the difference between financial literacy and financial management is important because they are two very different things. That way, you can avoid misinterpretation and be able to apply it in your financial life. So, what are the differences? Check out the full details below.
Financial Literacy
- Definition: Financial literacy is an individual's ability to understand and use financial knowledge and skills in everyday life. This includes an understanding of budgeting, saving, investing and financial risk.
- Focus: Financial literacy is more oriented towards the knowledge and understanding of financial concepts. It involves the ability to make wise decisions related to money management, including how to earn, save, spend and invest money effectively.
- Objective: The goal of financial literacy is to improve the financial well-being of individuals by providing them with the tools to make informed and responsible financial decisions.
Financial Management
- Definition: Financial management refers to the process of planning, organizing, controlling, and monitoring financial resources to achieve specific financial goals. It includes the management of income, expenses, investments, and debt.
- Focus: Financial management focuses more on the practical application of financial knowledge to manage assets and liabilities. It involves concrete strategies in cash management, budget planning, and investment analysis.
- Objectives: The goal of financial management is to ensure that individuals or organizations can achieve their financial goals efficiently and effectively through the appropriate use of resources.
In summary, financial literacy is about understanding the financial concepts and skills needed to make informed decisions, while financial management is about how to put that knowledge into practice to effectively manage financial resources.
