Role of financial literacy in financial decision making

A financial decision arises from some need. The study of the nature and characteristics of various financial needs serves as the starting point in financial decision. The understanding of financial needs leads to an understanding that there exists a structure and reasoning regarding financial literacy to take financial decision. Financial literacy has assumed greater importance in the recent years, as financial markets have become increasingly complex and there is also an information asymmetry which makes it very difficult for a common person to take informed choices. The intent of financial education should concentrate on financial activities and behavior that promote general financial well-being and knowledge. Financial literacy must begin by explaining the need and importance of good financial decisions. We all know that the health of the nation's financial system depends on the ability of its people to effectively manage their own finances. To make financial education successful, there is a need to increase awareness about the importance of financial education and planning for financial decision making. The paper tries to analyze financial literacy to study the relationship between financial literacy and financial decision making.