Purpose This study aims to investigate the relationship between employees’ financial well-being and several facets of financial literacy, such as financial experiences, financial awareness and financial skills. Design/methodology/approach A survey method was used to gather primary data from 719 individuals working in small and medium sized enterprises (SMEs) of India. Structural equation modelling analysis was used to test the study’s hypothesis, which focused on how financial behaviour and financial self-efficacy affect the relationships between various financial literacy components and overall financial well-beings of SME employees. A 95% confidence interval and a percentile bootstrap analysis were used to examine the mediation effect. Findings The study’s results showed that all components of financial literacy significantly enhance overall financial well-being. Furthermore, the linkage between financial literacy and financial well-being was found to be partially mediated through financial self-efficacy and financial behaviour. Practical implications The findings of this study carry practical implications for financial analysts, financial planners, lawmakers, educational institution administrators and, most importantly, employees of SMEs. Understanding these elements can help in developing strategies to improve financial literacy on both individual and community level. Originality/value Financial literacy is vital for economic resilience, financial empowerment and financial inclusion in any economy. While financial literacy is commonly linked with financial outcomes, this paper brings a fresh perspective by exploring the mediating roles of financial behaviour and self-efficacy.
Rai et al. (2025) studied this question.