This study aims to examine the impact of family education based on Islamic economics in reducing family financial distress within families from the perspective of university students. The study was conducted on 359 undergraduate students of Yarmouk University, Irbid, Jordan, to assess how much Islamic teachings of moderation, future planning, and financial prudence are practiced in familial financial decision-making patterns. Using descriptive and inferential analyses such as t-tests, ANOVA, correlation coefficients, and regression analysis, this study examines possible links between family budget and financial management principles and their strategies and financial distress. The findings demonstrate that compliance with Islamic financial principles significantly reduces the family’s financial distress by emphasizing needs over wants and ensuring the sound management of resources. Critical demographic variables, including income, gender, and household size, emerged as significant moderators in these relationships. The study highlights the practical and spiritual importance of incorporating Islamic teachings into family education to improve financial literacy. By offering cultural and religious perspectives on financial management and literacy, this research is valuable for shaping policies, practices, and interventions aimed at Muslim populations and global society.