The logical connection between financial literacy (FL) and household well-being (HWB) has been a subject of economic debate among academics and policymakers for a long time. The World Bank considers FL as a tool for poverty eradication and reducing income inequality across the globe. The present study aims to assess the impact of FL on HWB among rural households in the Cachar district of Assam state. We have constructed the HWB index (HWBI) by considering educational background, health status (HLT), wealth information (WLT) and water, sanitation and hygiene (WASH) facilities as holistic measures of HWB. Further, the composite FL index (CFLI) has been measured by considering knowledge of multiple dimensions of financial services. The sub-dimensions under the HWBI and CFLI were constructed using the percentage present score (PPS) approach based on multiple binary response questions under each dimension. Multi-stage sampling has been utilised for data collection through personal interviews using structured schedules in rural and urban areas, and logit-transformed regression has been used to investigate the impact of FL on HWB. The findings of the study report that urban households have significantly higher degrees of FL and HWB than rural households in the study area. We found that heterogeneity exists in FL based on gender and marital status. The results reveal that FL significantly impacts HWB and indicate that demographic variables such as education, income, internet-enabled mobile phones and social media promote HWB. This study bridges the literature gap by investigating the real-world association between FL and HWB. It provides empirical insights for policy-making to improve HWB by increasing financial inclusiveness in society.
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