On the most basic level, literacy is defined as “the ability to read and write.” However, different organizations have more specific definitions. The National Assessment of Adult Literacy (NAAL), for example, defines literacy as “the ability to use printed and written information to function in society, to achieve one's goals, and to develop one's knowledge and potential.” In order to develop this ability, the NAAL says that one must not only be able to recognize letters and words, but to also make inferences, draw conclusions, understand cause-and-effect relationships, and other higher level skills.
So it’s not just the ability to read and write, but also to understand, use and apply what you read, and to communicate effectively in writing.

Remember when you hated your high school Trigonometry class, and you asked yourself, “When am I ever going to use this?” Unless you went into architecture or certain types of engineering, you probably haven’t ever used it (and if you were one of the kids asking that question, you probably didn’t go into any of those professions). But no one ever sits in English class and asks when they’re going to use the skills they’re learning. Even if you’re analyzing bizarre 20th century poetry you think is completely pointless, you instinctively understand that the skills you’re learning are going to be useful to you down the road.
When you develop literacy skills, you are learning not just to read, but to think. You are learning to apply your knowledge in one area to other areas as well. Learning to recognize cause-and-effect relationships in stories helps you recognize them in real life, learning to effectively paraphrase information you have read teaches you good interpersonal communication, and interpreting the purpose of a work is very similar to evaluating the purpose of your life, which is essential to setting and achieving goals.
Without these higher-level literacy skills, people can go through life making bad choices because they don’t foresee the consequences, there was a miscommunication, or they can’t step back and see the big picture or purpose.
But even on a more basic level, literacy is important for survival. What if you couldn’t read the instructions or the allergy warnings for your prescription medication? What if you couldn’t get a driver’s license or read the bus schedule? What if you couldn’t fill out a job application because you were illiterate?
People get by somehow. They figure it out. They get help, but if you have children, your own ability to read and write (or lack thereof) begins to affect them as well. Studies have shown that children are more successful in school if their parents read to them when they were younger. Schools send home important notes and notices, kids need help with their homework, these are just some of the essential needs for parents to be literate.
On a more global level, the United Nations Educational, Scientific and Cultural Organization (UNESCO) says that literacy is “essential for eradicating poverty, reducing child mortality, curbing population growth, achieving gender equality and ensuring sustainable development, peace and democracy...and literate societies are better geared to meet pressing development.” Illiteracy doesn’t just affect those who are illiterate.