Financial literacy, confidence and well-being: The mediating role of financial behavior

Abstract

This study aims to investigate the impact of financial literacy and confidence on the financial well-being of US households and to explore the mediating role of financial behaviors in this relationship. To do this, we analyzed a large dataset from the two most recent waves of the state-by-state National Financial Capability Study (NFCS), covering a representative sample of US adults (n = 43,104). Results from multiple regression and mediation analyses, adjusted for relevant controls, show that financial literacy influences financial well-being directly and indirectly (mediated) through financial behaviors. Our analyses further indicate that financial confidence has a positive impact, directly and indirectly through financial behaviors, on financial well-being. Overall, our results suggest that higher levels of financial literacy and confidence lead to more responsible financial behavior, which, in turn, influences financial well-being. The findings of this study provide a valuable addition to the literature and directions for future research.