How to understand a word exactly?

The accepted (traditional) meaning of that statement is concerned with money.
(EXAMPLE: the song Money by the Beatles http://www.azlyrics.com/lyrics/beatles/moneythatswhatiwant.html)

I think every native English speaker understands that phrase to mean "The best things in life cost nothing", or the thought could otherwise be expressed as "The best things in life cannot be bought".

Understandable, but it would have been phrased differently if that's what he meant. You are equating "free" with "freedom" in your interpretation. If he has said "the best thing is life is freedom," then you would be correct in your interpretation.

But free has more than one meaning. It can mean unrestricted and not constrained, such as in "you are free to go." But another meaning is, as noted by others, simply "without cost." It is only the second meaning that would make sense in this context.

There's a song, too:

The moon belongs to everyone
The best things in life are free
The stars belong to everyone
They gleam there for you and me

The flowers in spring
The robins that sing
The sunbeams that shine
They're yours, they're mine

And love can come to anyone
The best things in life are free