# Financial Literacy

*Everyday Money — Finicade finance glossary*

Financial literacy is understanding the core money concepts — interest, inflation, diversification, the cost of debt — well enough to make good decisions. The standard measure is the three-question 'Big Three' test on compounding, inflation and diversification; barely a third of adults worldwide get all three right. The gap is expensive rather than abstract: it maps directly onto carrying revolving credit-card balances, undersaving for retirement, and paying for advice that a fee-only index fund would have beaten.

**Also known as:** money literacy, financial education

**Related terms:** [Budget](https://finicade.com/glossary/budget), [Compound Interest](https://finicade.com/glossary/compound-interest), [Credit Score](https://finicade.com/glossary/credit-score), [Diversification](https://finicade.com/glossary/diversification)

Source: https://finicade.com/glossary/financial-literacy