Final answer:
Personal financial literacy involves understanding the functions and roles of financial institutions in saving, borrowing, and investing; and acquiring practical skills like investing, saving, managing a checking account, understanding loans, and maintaining a good credit score.
Step-by-step explanation:
Financial literacy is an essential component of education that equips students with the knowledge necessary to make informed and effective decisions with all of their financial resources. Amongst the topics covered under personal financial literacy is the understanding of financial markets/institutions and their roles in saving, borrowing, and capital formation. Financial institutions such as banks, credit unions, and investment firms play a critical part in the economic health of individuals and businesses. They provide services that allow for the secure savings of money, the ability to borrow with various forms of credit, and the capacity to invest in different markets for future gains.
To be a wise investor in the stock market and other personal investment options, individuals need to assess investment opportunities and develop a personal retirement plan that aligns with their long-term financial goals. Learning how to begin a savings program is equally essential, as it serves as the foundation for financial security. Furthermore, it is vital to know how to maintain a checking account, understand the different types of loans available, comprehend the responsibilities when borrowing money, and develop strategies to become a low-risk borrower by improving one's personal credit score.