Financial Literacy and Household Financial Decision-Making in the Digital Economy

Abstract

Financial literacy is an important capability for households operating in an increasingly
complex financial environment. Decisions about saving, borrowing, insurance, investment
and digital payments can have long-term consequences for household welfare. This paper
examines how financial literacy influences household financial decision-making, with
attention to budgeting, saving behaviour, debt management, risk awareness, investment
choices and digital finance. The paper argues that financial literacy can improve decision
quality, but education alone cannot overcome structural constraints such as low income,
limited access to suitable products or unstable employment. Effective policy therefore
requires both capability building and accessible financial services.