Researchers have not agreed on what should constitute a measure of financial well-being (FWB). This is especially problematic for South Africa as the level of households’ financial satisfaction is deteriorating. Previous studies focused on socio-demographic determinants and measured FWB using subjective or objective approaches. This study argues that both approaches undermine and limit its scope. Hence, it calculates a multi-dimensional index for FWB and ascertain its determinants. Five socio-economic composite datasets were employed in a principal component analytical (PCA) technique to calculate this index. The PCA result reveals that FWB in South Africa is more susceptible to economic indicators than socio-demographic factors. Hence, the study modelled a dynamic equation based on the life-cycle hypothesis to examine the impacts of savings and investment and their interaction with financial literacy on households’ FWB in South Africa from 1980 to 2023. Results from the nonlinear autoregressive distributed lag (NARDL) estimation technique reveal that savings emits an asymmetric impact on FWB during the short run with no asymmetric impact in the long run. The result also reveals that financial literacy improved the impact of investment and savings as a transmission channel to better FWB, especially in the long run. The study concludes that FWB is more predisposed to economic determinants in the long run, with improved impact through higher financial literacy. Therefore, it recommends diversifying savings to profitable investment through better financial literacy to improve financial well-being.

Index Terms- Financial well-being, Household Disposable Income, Savings, Investment, Financial literacy.

JEL Classification : D14, D15, D12; O47