How Financial Literacy Makes Us Happier

You might think it’s boring, complicated, or both. But understanding money is important, and it doesn’t have to be hard. Few things have as direct an impact on your life, with the potential to make you happier, healthier, and definitely richer. Here are three super important ways financial literacy makes your life better.

What is financial literacy?

At its most basic, financial literacy is recognizing how to use cash responsibly. Being financially literate means you have the knowledge to make good decisions about spending, saving, taxes and investments. More specifically, it means you’re familiar with “financial concepts like compound interest, financial planning, the mechanics of a credit card, advantageous savings methods, consumer rights, time value of money, etc.,” explains Investopedia. If all these terms make your head spin, know two things: 1) You’re not alone, and 2) It’s not necessarily your fault. Unless your parents proactively taught you about money, you were probably left to your own devices — since only 17 states require high school students to take a personal finance course. But here are three hugely important ways that financial literacy can improve your well-being: 

1. It reduces stress 

Money is the number one cause of stress for Americans, according to a 2016 American Psychological Association survey. Not only does stress impact your mood and outlook; it also can cause health problems like headaches, chest pain, and trouble sleeping. Anyone who’s been late on bills, living paycheck to paycheck or drowning in debt knows how stressful it is. Getting a handle on your finances means paying back debt, improving credit, and knowing you have enough to pay rent each month. Once you do all that, you’ll even be able to start saving for emergencies and retirement … And we don’t need to tell you what a burden that will take off your shoulders.

2. It improves relationships 

Finances are the leading cause of friction in relationships, and money fights early on may predict divorce. If you and your partner choose to become financially literate together, it’ll probably strengthen your relationship. And once you both get on the same financial page, money will no longer be a reason to fight — instead, it’ll be a tool for investing in your joint future.

3. It frees up time for things you love 

Time is money and money is time, and becoming financially literate means you’ll have more of both. When you’re in control of your money, you won’t need to spend so much time sorting bills or calling debt collectors. You might not even have to work as many hours. That extra time frees you up to do things you enjoy: spending time with your family, participating in your favorite hobbies, or volunteering in your community. How nice does that sound?


Clearly, financial literacy pays out more than in just simple dollar bills. Financial literacy can improve your health and general well-being, too. So think about that next time you groan when somebody mentions financial literacy to you. 

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