Abstract

Awareness of financial literacy has increased significantly over the past decade and is now regarded as a key component in determining an individual’s financial wellbeing as well as a measure of broader economic development. Hence, financial literacy is increasingly recognized as a critical tool for enabling individuals to make informed decisions regarding saving, investing, borrowing, and long-term financial planning. This study examines how financial literacy levels vary across the United States and evaluates the impact of financial literacy on poverty rates. It also explores how economic factors such as employment status, education level, and other variables, along with financial literacy, influence state-level poverty. Utilizing the National Financial Capability Study provided from FINRA 2009-2024 as well as multivariate regression techniques, the findings conclude that financial literacy decreases poverty level and states with higher levels of financial literacy have better economic outcomes. To check the robustness, this research also considers income inequality and tests the impact of financial literacy on income inequality. The results remain consistent and robust across alternative model specifications. Additionally, these findings offer policy-relevant insights for economists and policymakers seeking to implement targeted financial capability and education programs that promote economic mobility and reduce poverty at the state level. Overall, the study highlights the importance of incorporating financial literacy education at the school level into broader economic policy frameworks.

Keywords

Financial Literacy, Poverty, State-Level Analysis, Panel Data

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