Based on the dynamic optimal control theory model, using the micro survey data of Chinese households, this paper makes a systematic study on the role of financial literacy in the allocation of family financial assets and the impact on the portfolio effectiveness. The analysis shows that under certain conditions, financial literacy can significantly increase the proportion of risk assets in household assets, and help to maximize consumption utility. The empirical analysis considering endogeneity shows that financial literacy has a significant positive impact on risk assets and financial assets, but it cannot act on risk-free assets such as treasury bonds. The promotion of financial literacy will help increase the allocation probability of stocks and funds, and help to implement a positive investment strategy, but it is not significant for negative investment strategies. The improvement of financial literacy can significantly increase the effectiveness of household portfolios and promote households to obtain more excess returns.