Financial literacy is key to sound financial health. But financial savvy is what differentiates the comfortable from the truly stable. Unfortunately, a staggering lack of money smarts plagues Americans, according to a study on financial literacy conducted by the National Foundation for Credit Counseling. About 45 percent of U.S. adults, for instance, grade their knowledge of personal finance a “C” or worse. Meanwhile, three out of five admit to not keeping a budget, a life skill that every adult should master even as early as high school.
As this report reflects, however, residents of certain states are sharper than their peers when it comes to maintaining their household balance sheets. To determine where American consumers set the best example, WalletHub compared the 50 states and the District of Columbia across 24 key metrics that represent financial savvy — or lack thereof. Our data set ranges from median credit score to annual savings-account average to credit-card debt as a share of income. Read on for our findings, expert insight from a panel of researchers and a full description of our methodology.
Most Financially Savvy States
‘Debt & Spending’ Rank
‘Financial Literacy’ Rank
|12||District of Columbia||63.41||2||2||34||35|
*No. 1 = Most Financially Savvy
Juggling finances is no easy task, and teaching such a skill to one’s children can be just as challenging. For guidance, we asked a panel of experts to weigh in with their insight and advice on certain financial matters. Click on the experts’ profiles to read their bios and thoughts on the following key questions:
- What tips do you have for consumers looking to make a budget and stick to it?
- What is the biggest obstacle for consumers trying to stay on budget?
- What tips do you have for consumers to get out of debt and stay debt-free?
- How should parents teach children about the importance of financial responsibility?
Ask the Experts
In order to determine where the financially savviest consumers live, WalletHub compared the 50 states and District of Columbia across four key dimensions: 1) Debt & Spending, 2) Financial Literacy, 3) Credit and 4) Saving.
We evaluated those dimensions using 24 relevant metrics, which are listed below with their corresponding weights. Each metric was graded on a 100-point scale, with a score of 100 representing the financially savviest consumers.
Finally, we determined each state and the District’s weighted average across all metrics to calculate its overall score and used the resulting scores to rank-order our sample.
Debt & Spending – Total Points: 40
- Total Debt as Share of Median Earnings: Full Weight (~2.86 Points)
- Mortgage Debt as Share of Median Earnings: Full Weight (~2.86 Points)
- Credit-Card Debt as Share of Median Earnings: Full Weight (~2.86 Points)
- Student-Loan Debt as Share of Median Earnings: Full Weight (~2.86 Points)
- Car-Loan Debt as Share of Median Earnings: Full Weight (~2.86 Points)
- Personal-Bankruptcy Rate: Full Weight (~2.86 Points)
- Foreclosure Rate: Full Weight (~2.86 Points)
- Housing Expenses as Share of Median Home Price: Full Weight (~2.86 Points)
- Ratio of Total Non-housing Expenses to Personal Income: Full Weight (~2.86 Points)
- Share of Credit Usage: Full Weight (~2.86 Points)
- Share of Adults Spending More than They Earn: Full Weight (~2.86 Points)
- Share of Adults Making Only Minimum Payments on Their Credit Cards: Full Weight (~2.86 Points)
- Share of Adults Borrowing from Non-bank Lenders: Full Weight (~2.86 Points)
- Share of Adults Striving to Achieve Long-Term Financial Goals: Full Weight (~2.86 Points)
Financial Literacy – Total Points: 20
- WalletHub Financial Literacy Score: Triple Weight (~15.00 Points)
- Share of Adults Using Online Financial Services: Full Weight (~5.00 Points)
Credit – Total Points: 20
- Median Credit Score: Full Weight (~6.67 Points)
- Delinquency Rate: Full Weight (~6.67 Points)
Note: This metric measures delinquency rates across mortgages, auto loans, student loans and credit cards.
- Share of Adults Borrowing Against Their Retirement Income: Full Weight (~6.67 Points)
Saving – Total Points: 20
- Annual Consumer Savings-Account Average: Full Weight (~4.00 Points)
- Share of Adults with Rainy-Day Funds: Full Weight (~4.00 Points)
- Share of Adults with College Savings for Their Children: Full Weight (~4.00 Points)
- Share of Adults with Budgets: Full Weight (~4.00 Points)
- Share of Unbanked Households: Full Weight (~4.00 Points)
Sources: Data used to create this ranking were collected from the U.S. Census Bureau, Administrative Office of the U.S. Courts, Department of Commerce - Bureau of Economic Analysis, TransUnion, FINRA Investor Education Foundation, Federal Reserve Bank of New York, Federal Deposit Insurance Corporation, Renwood RealtyTrac, National Telecommunications and Information Administration, Pitney Bowes and WalletHub research.
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