How Financial Literacy Translates into Financial Well-Being: A Behavioral Perspective

Abstract

Financial well-being is crucial for individual stability, yet in developing economies like Pakistan, factors like literacy, inclusion, and socioeconomic status create complex challenges. University employees, despite their education, face unique financial strains due to fixed incomes and limited access to tailored financial services. This study examines the interplay of financial literacy, inclusion, socioeconomic status, and access to finance on the financial well-being of public university employees in Khyber Pakhtunkhwa, Pakistan. It specifically investigates the mediating role of financial behavior in these relationships. A quantitative, cross-sectional survey was conducted with 250 faculty and administrative staff. Data were analyzed using correlation, regression, and mediation analysis via Hayes PROCESS Macro to test the hypotheses derived from the Theory of Planned Behavior. Socioeconomic status and financial literacy were the strongest direct predictors of financial well-being. Financial behavior partially mediated the effects of financial literacy, inclusion, and access to finance, confirming that knowledge and access translate into well-being through improved financial practices. Conversely, financial inclusion alone did not significantly predict well-being, indicating that mere access to services is insufficient without behavioral change. The findings underscore that enhancing financial well-being requires not only improving access to finance but also strengthening financial literacy to foster positive financial behaviors. Policymakers and institutions should develop integrated programs that combine financial education with service access to empower employees and promote financial resilience.