Practice Improves Performance: The Mediating Interaction of Active Management on Financial Literacy and Financial Well-being

What is the relationship between an individual’s financial literacy and their perceived financial well-being? Based on the behavioral theories of Bandura and Ajzen, our study examines how financial knowledge affects intermediary behavior factors such as financial management skill, habit, and actions, and how these self-efficacy behaviors improve financial well-being. The findings imply that, along with the demonstrated direct relationship between financial literacy and well-being, the benefit of financial knowledge positively impacts the sense of financial wellbeing when individuals employ their knowledge in financial decisions and activities. We conclude that benefits from financial literacy on well-being are largely functions of the cultivation of positive financial decisions and actions reinforced through active financial management. Performance and policy implications are discussed.