Most studies with children in out-of-home care highlight the problems and challenges associated with residential or foster care, and few have investigated the well-being of these children. The aim of this study is to compare the subjective well-being (SWB) of children hosted in institutions and in foster families with the well-being of children living with their families. We used a sample of 422 children, aged between 11 and 15, being 39 in foster care, 145 in residential care, and 238 living with their families in the general population. We measured SWB with the Personal Well-being Index-School Children (PWI-SC9) and we evaluated the impact of several variables in this index. Results indicate that children in residential care have a lower SWB in all variables compared to foster care and general populations groups. These outcomes should challenge children’s public policies to change from a dominant positive attitude toward institutionalisation to a more successful approach based on foster care families. This approach will provide the opportunity for children in out-of-home care to grow up in a family, and improve their SWB, which can probably ensure a better life trajectory.