The subjective well-being (SWB) of children in out-of-home care is crucial to assess their potential quality of life today and in the future. This study aims at comparing SWB of children in residential care and in foster families in two European territories or jurisdictions: Portugal and Catalonia (Spain). This study used a sample of 551 children, aged between 11 and 15, being 39 in foster care and 145 in residential care in Portugal, and 41 and 326 respectively in Catalonia. SWB was measured with the Personal Well-being Index-School Children (PWI-SC9) and other variables were evaluated, such as happiness with the placement, relationship with carers, satisfaction with school, and perceptions about themselves and their lives. Results indicate that children in residential care have a lower SWB, as well as lower scores in most of the other variables, compared to children in the foster care groups in the two territories. These results should challenge public policymaking for children to change from an attitude dominantly favourable to institutionalisation to a more successful approach based on family foster care. This can provide the opportunity for children in out-of-home care to grow up with higher SWB and, probably, a better life trajectory.