Financial literacy plays an important role in improving personal financial management and protecting households from financial instability. This study examines the impact of financial literacy on household financial decision-making in developing countries. It highlights that financial problems are not only caused by low income but also by poor financial planning and improper use of credit. Despite the growing number of financial literacy programs, many people in developing nations still lack adequate financial knowledge.The study analyses the relationship between financial literacy, financial preferences, and decisions related to savings and debt management. The findings show that financial literacy has a strong positive influence on saving behaviour, encouraging individuals to make better financial choices. However, its impact on debt management is relatively weaker. Financial education programs are found to be effective in the short term, but their long-term impact is uncertain.

The study also reveals that financial literacy and its effects differ across various socio-economic groups, indicating the need for customized policy measures. Overall, the research emphasizes the importance of improving financial literacy to enhance financial inclusion, stability, and informed decision-making among households in developing countries.