Ephesians 2:8–10 says that salvation is by grace and through faith. What are grace and faith, and how do they relate to “good works”?

Ephesians 2:8–10 states, “For by grace you have been saved through faith, and that not of yourselves; it is the gift of God, not of works, lest anyone should boast. For we are His workmanship, created in Christ Jesus for good works, which God prepared beforehand that we should walk in them.”

God’s grace is His divine favor, His merciful kindness toward us. Faith may be defined simply as trusting belief in God and His promises. Salvation, then, is available to us only because of God’s merciful kindness. We obtain it by trusting in God and the provisions He has made for us. This trusting belief, or faith, always manifests itself through the actions of the person possessing it (see Hebrews 11). That’s what Paul means when he says that God’s people are “created in Christ Jesus for good works, which God prepared beforehand that we should walk in them.”

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Are people who have never heard of Jesus going to the lake of fire? What about small children? It doesn’t seem God would punish people who never knew to repent. Please help.

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Doesn’t Paul remind the Colossians that the Mosaic law was nailed to the cross and, in the same context, warn of heretics who would have them adopt Old Testament holy days (Colossians 2:14–17)?