This paper assesses the economic importance of financial literacy, focusing on its theoretical underpinnings and empirical evidence. Financial literacy is viewed as a form of human capital investment, influencing individual welfare and policy. The authors analyze how financial knowledge affects economic decision-making, highlighting the importance of financial literacy in navigating complex financial products and retirement planning. They find that financial illiteracy is widespread, with significant gaps among subgroups such as the elderly, women, and less educated individuals. Empirical studies show that financial literacy is linked to better financial outcomes, including higher participation in financial markets, more effective retirement planning, and lower debt levels. The paper also discusses the costs of financial ignorance, noting that financially illiterate individuals are more likely to engage in high-cost borrowing and fall victim to financial scams. Theoretical models suggest that financial literacy can be endogenously determined, with implications for wealth inequality and welfare. The authors conclude that financial education programs should target the least educated, as they may not benefit from current transfer programs. Overall, the paper underscores the importance of financial literacy in improving economic outcomes and informing public policy.This paper assesses the economic importance of financial literacy, focusing on its theoretical underpinnings and empirical evidence. Financial literacy is viewed as a form of human capital investment, influencing individual welfare and policy. The authors analyze how financial knowledge affects economic decision-making, highlighting the importance of financial literacy in navigating complex financial products and retirement planning. They find that financial illiteracy is widespread, with significant gaps among subgroups such as the elderly, women, and less educated individuals. Empirical studies show that financial literacy is linked to better financial outcomes, including higher participation in financial markets, more effective retirement planning, and lower debt levels. The paper also discusses the costs of financial ignorance, noting that financially illiterate individuals are more likely to engage in high-cost borrowing and fall victim to financial scams. Theoretical models suggest that financial literacy can be endogenously determined, with implications for wealth inequality and welfare. The authors conclude that financial education programs should target the least educated, as they may not benefit from current transfer programs. Overall, the paper underscores the importance of financial literacy in improving economic outcomes and informing public policy.