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This is America’s least financially literate state
Southern states’ under-banked tendencies correlate with their lack of financial literacy
By Alessandra
Financial literacy is sorely lacking across the U.S., but some areas suffer even more than others.
Louisiana was ranked the least financially literate state, according to personal finance site WalletHub, which analyzed 15 metrics including high school financial literacy grades and how many adults have emergency funds. Southern states ranked particularly low compared with northern states, the study showed, correlated with the fact that they offer less financial education, have lower credit scores and are ‘under-banked’ (that is, a higher than average number of residents don’t have a bank account).
Not many states require any sort of financial education — only 17 states required high school students take a course in personal finance in 2016, the same number of states that required them to do so in 2014, according to this survey from the Council for Economic Education, a New York-based organization dedicated to financial education of students in kindergarten through high school. Young adults say having some sort of personal finance course in school would help them — more than 50% of more than 1,000 18-24 year olds said high school money management courses would benefit their lives the most, compared with about 18% that said mathematics, 16.5% that said science and over 14% that said social studies.
The site also looked at public high-school graduation rates and household spending habits — for example, Massachusetts had the lowest share of adults who spend more than they earn, compared with Delaware, which had the least sustainable spending habits. West Virginia residents were least likely to have a “rainy-day fund,” followed by Oklahoma, Missouri, Mississippi and Tennessee. North Dakota was most likely to have such a fund, followed by New Hampshire, Minnesota, Hawaii and California. Louisiana had the highest share of unbanked households, compared with Vermont, which had the lowest share.
The least financially literate states, the study concluded, were:
51. Louisiana
50. District of Columbia
49. Rhode Island
48. Kentucky
47. Mississippi
46. Oklahoma
45. Alaska
44. New Mexico
43. Tennessee
42. Nevada
Meanwhile, the most financially literate states were:
1. New Hampshire
2. Minnesota
3. North Dakota
4. Maine
5. Virginia
6. Maryland
7. New Jersey
8. Illinois
9. Colorado
10. Montana
See: We need to mandate financial education in grades K-12… and beyond
Better financial education could help investors in the long run — in fact, financial illiteracy might have cost investors in the country $200 billion in the last 20 years, because they did not understand basic financial concepts (such as compound interest and inflation) and the cost of investment advice and fees on portfolios. Without financial education in school, children are often picking up money habits at home — that’s not always a good thing, according to a T. Rowe Price study, which found parents with bad money habits pass them on to their kids. Instead, parents are encouraged to start teaching their children the importance of money management early on, such as saving and being honest about the family’s finances.
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