Does Financial Literacy Improve Life Satisfaction? Robust Evidence From Several Approaches

ABSTRACT This study examines the causal impacts of financial literacy on current and future life satisfaction. We use a cross‐sectional dataset combined from two unique datasets, including the S&P's Global Financial Literacy Survey and Gallup World Poll for 138 countries. Our results indicate that financial literacy is positively associated with life satisfaction. Unlike previous studies, we establish the causal impacts of financial literacy on life satisfaction using four novel instrument‐free approaches, and the instrumental variable estimation, to address endogeneity. In addition, our results reveal that the effect of financial literacy on future life satisfaction is larger than on the current one.