Financial Markets and Instruments

Which of the following best explains the utility aspect of financial literacy?

Directions: Answer the given question based on the following passage:

Financial literacy refers to knowledge required for managing personal finance. It does not necessarily refer to formal education in finance. Instead, it encompasses an understanding of how to use credit responsibly, manage money and savings, minimize financial risk and drive long term benefits of savings.
The ultimate goal of financial literacy is the empowerment of people to take action by them that are in their self interest. When people know about the financial products available and when they are able to evaluate the merits and demerits of each product and the suitability of the product for their specific needs, they are in a better position to decide what they want and feel empowered in a meaningful way..
Financial inclusion has been defined by United Nations as ‘a financial sector that provides access to credit for all bankable people and firms and saving and payment services to everyone. Inclusive finance does not require that everyone is eligible to use each of services but they should be able to choose if desired.’ The financial sector provides critical financial services to household and business enterprise which include safe savings and range of risk/return trade off services. It reduces dependence on informal financial sources such as pawn shops, money lenders or informal groups relating to savings and credit associations by poor low income vulnerable group of society. It facilitates payment between different parties and makes them safer to a cash transaction.
The access to financial services viz deposits, loans, money transfer and insurance to the poor and low income group households will help them to insure themselves against shocks such as illness of self or family members, loss of employment etc and equip to meet the eventualities in a better way and they need not be demoralized.
A sizeable population of the world particularly the poor, low income group and vulnerable groups remain excluded from the most basic financial assistance provided by financial sector. It has been universally accepted that developing financial sector and improving access to financial services accelerate economic growth helps to achieve inclusive growth. Although the level of banking exclusion varies across the world, it is the same group of people who are affected, people having low income or who have history of bad debt. Markets exclude them because they do not have sufficient income which can be translated into purchasing power or have assets or capabilities which are translatable into labour and capable of yielding income through wages.