Posted by: John S Kiernan

The issue of widespread financial illiteracy garnered significant attention in the aftermath of the Great Recession. The housing-market collapse and ensuing financial crisis served as a stark reminder of our societal obsession with debt as well as the dangers of fingertip financial access in the hands of under-informed consumers.

But how much have we learned since, and what are we doing to help future generations avoid repeating our mistakes?

Not enough, it would seem. We ended 2016 with $89.2 billion in new credit-card debt, the highest increase since 2007. That’s unsurprising, considering that only two in five adults actually have a budget. There’s really no shortage of statistics that one can cite to illustrate our money-management shortcomings — from the 18 percent of Americans who spend more than they make to the 50 percent of folks who don’t have a rainy-day fund. But where are the problems most pronounced, and which areas are taking the necessary measures to foster a financially prosperous future?

WalletHub sought to answer those questions by analyzing financial-education programs and consumer habits — combined with the results of WalletHub’s proprietary WalletLiteracy Survey — in each of the 50 states and the District of Columbia. Our data set of 14 key metrics ranges from high-school financial literacy grade to share of adults with rainy-day funds. More information about our methodology as well a complete breakdown of our findings and expert commentary can be found below.

1. Main Findings
2. Detailed Findings
3. Correlation Analysis
4. Ask the Experts: Fostering U.S. Financial Literacy
5. Methodology

 

Main Findings

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Overall Rank	State	Total Score	‘WalletLiteracy’ Rank	‘Financial Planning & Habits’ Rank	‘Financial Knowledge & Education’ Rank
1	New Hampshire	72.26	1	6	4
2	Minnesota	70.67	6	4	8
3	North Dakota	68.75	2	7	29
4	Maine	68.68	8	18	5
5	Virginia	68.39	14	2	32
6	Maryland	68.33	22	3	22
7	New Jersey	67.50	16	9	16
8	Illinois	67.06	26	14	11
9	Colorado	66.83	21	10	18
10	Montana	66.81	23	24	3
11	Iowa	66.67	11	12	24
12	New York	66.15	17	30	12
13	Utah	66.10	15	1	45
14	Ohio	66.03	30	11	20
15	Kansas	65.92	34	28	2
16	Michigan	65.81	19	16	25
17	Wisconsin	65.59	4	43	1
18	Idaho	65.31	28	13	26
19	Vermont	64.92	10	21	31
20	Florida	64.78	31	34	7
21	Nebraska	64.53	18	27	27
22	Massachusetts	64.36	5	38	14
23	Connecticut	64.25	20	41	6
24	Arizona	64.11	41	25	13
25	Wyoming	63.89	9	32	28
26	West Virginia	63.39	48	22	10
27	Oregon	63.05	32	29	35
28	South Carolina	62.75	38	19	34
29	Indiana	62.69	35	35	21
30	North Carolina	62.64	37	17	39
31	Georgia	62.31	42	23	33
32	South Dakota	62.30	7	44	30
33	Delaware	61.93	33	40	19
34	California	61.82	12	49	15
35	Hawaii	61.63	3	39	42
36	Pennsylvania	61.59	25	51	9
37	Missouri	61.01	45	5	50
38	Alabama	60.98	46	15	44
39	Washington	60.86	24	46	36
40	Texas	60.84	43	26	41
41	Arkansas	60.40	39	20	46
42	Nevada	59.54	36	37	43
43	Tennessee	59.49	44	8	51
44	New Mexico	59.45	47	42	23
45	Alaska	59.20	27	48	38
46	Oklahoma	59.13	49	36	37
47	Mississippi	59.00	50	45	17
48	Kentucky	58.63	40	33	48
49	Rhode Island	58.42	13	47	49
50	District of Columbia	58.25	29	50	40
51	Louisiana	57.10	51	31	47

   

Detailed Findings Embed on your website<iframe src="//d2e70e9yced57e.cloudfront.net/wallethub/embed/3337/financial-literacy-bar1.html" width="450" height="450" frameBorder="0" scrolling="no"></iframe> <div style="width:450px;font-size:12px;color:#888;">Source: <a href="http://ift.tt/2ngpusq;

 

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Correlation Analysis Embed on your website<iframe src="//d2e70e9yced57e.cloudfront.net/wallethub/embed/3337/financial-literacy-correl1.html" width="700" height="450" frameBorder="0" scrolling="no"></iframe> <div style="width:700px;font-size:12px;color:#888;">Source: <a href="http://ift.tt/2ngpusq;

 

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Ask the Experts: Fostering Financial Literacy in the U.S.

Financial literacy is a growing area of focus for the academic community — from public-school policymakers to university researchers. For insight into the current state of financial literacy as well as what the federal government, states and parents can do to help society improve its money-management skills, we turned to a select group of educators with expertise on such topics. Their bios and comments can be found below.

1. What should policymakers do to improve financial literacy?
2. How can parents equip their kids with financial know-how?
3. To what degree should financial literacy be a part of the K-12 curriculum? What are the most effective ways to teach financial concepts in schools?
4. What's the right balance between expecting consumers to educate themselves versus regulating financial service providers?
5. In evaluating the most financially literate states, what are the top five indicators?

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• Fenice B. Boyd Associate Professor of Literacy Education in the Department of Learning and Instruction at University at Buffalo
• Marla A. Sole Assistant Professor of Mathematics in the Guttman Community College
• Peter C. Freeman Adjunct Professor of Finance and Accounting at Golden Gate University
• Vivian Afi Dzokoto Associate Professor in the Department of African American Studies at Virginia Commonwealth University

Fenice B. Boyd Associate Professor of Literacy Education in the Department of Learning and Instruction at University at Buffalo What should policymakers do to improve financial literacy? One thing that policymakers could do to improve financial literacy is collaborate with teacher educators, superintendents, principals and classroom teachers to make financial literacy an intricate part of the school curriculum, starting early in elementary school. In other words, I think financial literacy as a topic or subject area should begin long before students reach 11th or 12th grade. From my research thus far, I’ve learned that in New York state for instance, the only subject that is required that comes close to financial literacy is 1/2 unit of economics, and students typically take economics for one semester during their senior year in high school. Financial literacy is not a required subject area in most states in the U.S., and for those that do require financial literacy, the impact on students’ financial literacy and behavior is inconclusive. If financial literacy were to become an intricate part of the school curriculum, classroom teachers would need ongoing professional development and support. There are numerous studies that teachers have reported that they are not equipped to teach students about personal finance. And here is where teacher educators (such as myself) would be helpful in designing research projects to study the impact of teacher professional development on students’ financial literacy and behavior, to inform policymakers about what needs to take place as far as the curriculum changes are concerned, what support teachers would need in order to provide students with high quality financial education, and finally, the impact on students’ learning outcomes. To what degree should financial literacy be a part of the K-12 curriculum? What are the most effective ways to teach financial concepts in schools? An effective (maybe not the most effective) way to teach financial concepts in schools would be through an interdisciplinary approach. For example, spending, saving, budgets, credit and debt might be taught in math class across grade levels. Concepts such as employment and income, risk management, insurance, etc., might be taught in English language arts and social studies. Teachers might design project-based learning units that are interdisciplinary (e.g., math, social studies, and English language arts). I draw these concepts from the National Standards in K–12 Personal Financial Education, 4th Edition (Jump$tart Coalition, 2015). Marla A. Sole Assistant Professor of Mathematics in the Guttman Community College To what degree should financial literacy be a part of the K-12 curriculum? Financial literacy is an essential skill for today’s youth and should be integrated into the K-12 and college curriculum. It is crucial that students learn about finance at an early age. Before graduating from high school, teens who plan to go to college need to be able to evaluate the terms of student loans and accurately estimate their future earnings. If entering the job market, since employers are increasingly shifting financial responsibility to individuals, young adults need to understand their retirement plans. As we have seen, with rising student loan debt and underfunded savings plans, uninformed early financial decisions can have long-lasting negative consequences that, due to a lack of financial education, often seem unexpected. Teaching financial literacy increases the chance that today’s youth will be able to live independently and lessens the likelihood that they will fall victim to predatory lending practices or outlive their savings. What are the most effective ways to teach financial concepts in schools? An interdisciplinary approach could help reinforce financial concepts and lead to greater understanding. Financial literacy could be taught in a range of courses. Students could learn about financial concepts and learn the appropriate terminology in economics courses. In mathematics courses, students could be taught how to calculate the interest on loans and compare investment options. Because many financial decisions are impacted by one’s tolerance for risk and interest in financial reward, students could examine how emotions impact financial decisions in psychology courses. In political science or ethics courses, students could weigh the desire to be compassionate and support funding government social programs against the need to cut government spending given the ballooning United States National Debt. What’s the right balance between expecting consumers to educate themselves versus regulating financial service providers? Consumers need to be protected from predatory lending practices and financial investment options that are purposefully deceptive. However, consumers need to take responsibility and learn the difference between key terms such as gross pay and net pay. Using this knowledge, consumers should make informed financial decisions and plan as best they can to live within their means. Peter C. Freeman Adjunct Professor of Finance and Accounting at Golden Gate University What should policymakers do to improve financial literacy? For policy makers, it depends. If you mean government officials, probably the less the better. However, if Dodd Frank is repealed and replaced -- as I would like to see -- then this might be included as part of the replacement. Educational policy makers is an entirely different story (see below). How can parents equip their kids with financial know-how? Give them an allowance and make them responsible for managing their own affairs on an age appropriate basis. There are well-developed programs I have seen. To what degree should financial literacy be a part of the K-12 curriculum? What are the most effective ways to teach financial concepts in schools? Financial literacy should definitely be part of K-12, both for financial literacy and math skills. In my view, discounted cash flow analysis is every bit if not more relevant than much of advanced math, geometry. Conic sections are more relevant and interesting? Not from my experience as a teacher. This should be included in the curriculum. What’s the right balance between expecting consumers to educate themselves versus regulating financial service providers? I believe financial service providers should provide appropriate information so their customers can make informed decisions. This is already being done, albeit with room for improvement. Financial planning is fiendishly complex in most situations, and I believe most financial service providers make a conscientious effort to educate their customers. But most of us do not make the effort, just check the box. And then sue the bastards when stuff happens. Why didn't you tell me! We did, why didn't you pay attention! This is a proper topic for policy makers, elaborating on my answer to point 1. Vivian Afi Dzokoto Associate Professor in the Department of African American Studies at Virginia Commonwealth University How can parents equip their kids with financial know-how? Ideally, this would occur in a manner similar to which parents impart other values and skills to their children: through frequent, repeated, implicit and explicit lessons, conversations, and experiences during various stages of their kids’ youth. In addition to activities that some U.S. parents already do (such as encouraging their children to save via piggy bank, playing money games such as monopoly, and letting the kids tag along to banks and ATMs), parents could involve their children in real world activities that have short-term financial impact. For example, an important lesson could be involving them in a few areas of the family budget -- of course, only to the extent to which they (the parents) are comfortable. Getting children of an appropriate age involved in understanding how much groceries cost, and putting them in charge of a week’s trip to the grocery store can be a worthwhile and memorable lesson in mathematics, budgeting, distinguishing between needs and wants, and recognizing the consequences of impulse shopping. It is important to recognize, however, that the extent to which parents can equip their kids with financial know-how is constrained by the extent to which parents themselves are financially savvy. In order to impart knowledge, one must first possess the knowledge. At one extreme, some parents discuss the stock market with their children on a regular basis, or watch TV shows that discuss money and investments alongside their children, and have interesting discussions afterwards. At the other extreme, some parents do not discuss financial matters with their children at all, or do so to a very limited extent. The latter is not necessarily surprising, given that 40% of U.S. adults self-rate their finance knowledge a grade of C or worse. In addition, some segments of the U.S. population interface only to a limited extent with the formal financial sector, which financial literacy is based on. Exclusion from the formal financial sector means no engagement with it, and limited knowledge about it, certainly not enough to impart to the next generation. Additionally, cultural, gender, educational, and socio-economic barriers exist. Some parents consider discussions of money “grown up stuff” that their children do not need to worry about until adulthood. It is estimated that 72% of parents experience some degree of reluctance to have money conversations with their kids. Parents can’t do it alone. To what degree should financial literacy be a part of the K-12 curriculum? What are the most effective ways to teach financial concepts in schools? Given the focus on testing these days, school systems need to make tough decisions in terms of what to include in their curriculum, how much focus to allocate to different competencies, what to leave out. That said, I absolutely think that financial literacy needs to a part of the K-12 curriculum. Financial literacy is an important life skill, and the academic environment is an important one to introduce financial knowledge to tomorrow’s leaders, earners, spenders, savers and investors. Various financial education models exist: some schools offer economics and personal finance courses, some schools and some states mandate successful completion of one or both prior to graduation. Ideally, financial literacy should be infused into the curriculum at multiple grade levels. Hands-on activities work great because students tend to remember them. That said, it’s not necessarily feasible to cover every single financial concept with a hands-on activity or excursion. In general, the fundamentals of learning should apply: clear communication, repetition, opportunities for practice, and application to promote relevance. There are lots of educational materials on various financial concepts available online for educators (age and grade appropriate lesson plans, handouts, videos, assessments, games). While many of them are free, a few companies have created comprehensive online personal finance courses on a web-based platform available to school systems for a fee. In other words, there are a ton of resources out there. I think that the effectiveness of the various resources and approaches to financial education has been understudied. The effectiveness of the various programs will be a function of both the content and delivery, which varies from program to program. In general, participation in financial education programs results in short-term increases in performance on assessments of financial literacy, and some studies have noted behavioral changes in adults, such as improved credit scores. Information on longer-term effects is somewhat mixed (see here). More work needs to be done in this area. In particular, apart from age tailoring (see for example themint.org, hsfpp.org) and language translation (e.g., consumerfinance.gov), a one-size-fits-all approach is used to teach people about money management. I am not convinced that’s the best approach. The effectiveness of a culturally-tailored approach is something that has not been adequately examined. What’s the right balance between expecting consumers to educate themselves versus regulating financial service providers? As far as regulation goes, I believe that some regulation of financial service providers (for purposes of consumer protection and national security) is important. While there are some who argue that too much regulation stifles creativity and growth potential, I don’t think that it is good for the consumer -- or for the country for that matter -- to push for no regulation at all, given the consequences (e.g., what happened during the 2008 financial crisis). One also has to recognize the fact that the financial services market is not static: new products are often introduced. Thanks to continued technological innovation, I don’t think that is a trend that will be slowing down anytime soon. Therefore, there needs to be a set of aspirational guidelines to inform the development and deployment of new products, as well as rules to curtail unethical, exploitative, and illegal activity in the name of making profit. The question, of course, is how much regulation is ideal (e.g., the Fiduciary Rule versus the Best Interest Standard debate, see here), and that’s an incredibly difficult question to answer. I think it is extremely important for the consumer of financial services to be educated about financial matters. Unfortunately, based on available national data on financial knowledge, I don’t think we are at a point where we can put the onus for financial education entirely on the consumer -- not yet, and probably, not anytime in the near future. It is unrealistic at this point to expect U.S. consumers to educate themselves. Why? Take a look at available data. In 2004, only a third of U.S. adults 50 or older (in other words, experienced consumers -- people who had been making financial decisions for years), were able to correctly answer a short series of questions assessing understanding of numeracy, inflation and risk (see

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