What does financial capability refer to?

Financial capability encompasses the capacity to manage financial resources effectively, which includes understanding and utilizing various financial tools and concepts to achieve personal financial goals. This concept goes beyond just knowledge or skills; it involves a holistic approach to handling finances that includes budgeting, saving, investing, and planning for the future. Being financially capable means having the ability to apply financial knowledge and skills in practical situations to make informed decisions and navigate financial challenges successfully.

In contrast, while the skills to save money effectively, the ability to invest in the stock market, and knowledge to reduce expenses are all important components of managing finances, they represent narrower aspects within the broader scope of financial capability. The broader definition takes into account not only the knowledge and skills but also an individual’s confidence and access to financial services, demonstrating a comprehensive understanding of managing all financial aspects.