The Midwest comes up aces while the South lags far behind other states in a comprehensive new ranking of individuals’ financial know-how. But while Minnesota and North Dakota rate 1 and 2 among all states, respectively, even their scores betray a low level of financial literacy.
For example, Minnesota and North Dakota both earn an A-plus for credit card utilization. That’s because they have the fewest people with credit cards that charge more than 30% of their credit limit—a widely noted threshold for responsible spending. But even in these A-plus states fewer than half of credit card holders manage to stay under that important threshold.
In other words, being the best isn’t all that good. No state should take a victory lap, conclude researchers at Champlain College Center for Financial Literacy, which produced the report after analyzing 59 data points from 18 public and private organizations. Among those organizations: AARP Public Policy Institute, American Council of Life Insurers, Experian, Federal Deposit Insurance Corporation, Federal Reserve Bank of New York, Financial Industry Regulatory Authority Investor Education Foundation, and Pew Charitable Trusts.
“We need to make adult personal finance education a priority among policymakers, financial institutions, the educational establishment and others,” John Pelletier, executive director of the center, said in a statement.
The report gave grades for financial knowledge, credit, saving and spending, retirement readiness, and insurance. Failing grades were still enough to land at the top of the ranking in a variety of categories. For example, only 29% of adults in Utah were offered and took a personal finance course in school, college or the workplace. That was the top score.
Likewise, only 61% of adults in South Dakota always pay their credit bills on time—the best of any state. And only 53% of adults in North Dakota were certain they could come up with $2,000 for an emergency—again, a failing top score.
Rounding out the top 10 states for individual financial know-how were Utah, Hawaii, Wyoming, New Hampshire, Iowa, South Dakota, Vermont, Alaska, Massachusetts, and Wisconsin. The bottom 10 was New Mexico, West Virginia, Texas, Georgia, Florida, Alabama, Oklahoma, Arkansas, Louisiana, and Mississippi.
Researchers measured two aspects of financial literacy: knowledge and behavior. The first is relatively easy to assess through quizzes. Behavior is more challenging but arguably more important. What good is knowledge that doesn’t produce better outcomes?
Behavior was measured through things like credit scores, bankruptcy rates, revolving credit and emergency funds. Overall, states scored better on knowledge of personal finance than they did on applying that knowledge to everyday decisions.