This study investigates the impact of financial literacy on financial well-being, accounting for state-level variations across the United States. Grounded in Human Capital Theory, which posits that individuals' knowledge and skills significantly influence their economic outcomes, this research employs a multilevel ordinal regression model to explore how subjective and objective financial literacy affect individuals' financial well-being. Using data from the NFCS 2021 dataset, the analysis captures individual and state-level variations in financial well-being. The study finds that objective and subjective financial literacy strongly predict financial well-being. While state-level factors contribute to variations in financial well-being, their influence is relatively minor compared to individual-level financial literacy and demographics. These findings highlight the importance of promoting financial literacy to improve financial well-being across diverse populations. For policymakers and educators, the study emphasizes the need for targeted financial education programs that address gaps in both knowledge and confidence, particularly among vulnerable groups, while acknowledging the role of state-level interventions in enhancing financial outcomes. Furthermore, the insights from this study can guide financial planners and advisors in developing more tailored strategies to improve financial literacy and support better financial decision-making, ultimately reducing financial stress and enhancing long-term financial security.
