Although many Americans came out of the financial crisis feeling more comfortable handling their money and as better investors, the country still has a low financial literacy.
Although many Americans came out of the financial crisis feeling more comfortable handling their money and as better investors, the country still has a low financial literacy, according to survey results.
Part of the State-by-State Capability Survey by FINRA Investor Education Foundation asked five basic financial literacy questions of respondents. While residents of some states did better than others, the national average was just 2.88 correct answers. In fact, just 14% of respondents were able to answer all five questions correctly.
“This survey reveals that many Americans continue to struggle to make ends meet, plan ahead and make sound financial decisions — and that financial literacy levels remain low, especially among our youngest workers,” FINRA Foundation Chairman Richard Ketchum said in a statement.
The financial literacy test presented situations involving five different fundamental concepts of economics and finance: interest rates, inflation, bond prices, mortgages and risk.
Surprisingly, respondents did worse in the 2012 survey compared to the respondents in the 2009 survey. The percentage of correct answers was lower in 2012 for four out of five questions. The one exception was the bond price questions, which had the same percentage of correct answers as in 2009.
While residents in Montana, Utah and Wyoming answered the most questions correctly in the financial literacy test, these states didn’t do as well. Residents of Utah did the best by far, answering 3.23 questions correctly.
2.80 correct answers
Though their financial literacy isn’t the best, Floridians can handle their own money. A higher percent have a rainy day fund compared to the national average and they are less likely to have medical debt.
Sarasota. Copyright Patrick Braga
2.77 correct answers
Although they are more likely to have medical debt than the rest of the country, residents of Alabama are on par with the national average for percent spending less than they earn, percent with rainy day funds and percent paying credit cards in full.
Downtown seen from Red Mountain. Copyright Andre Natta.
8. South Carolina
2.75 correct answers
They are far more likely to have medical debt — 32% compared to the national average of 26%. Plus, they are more likely to simply pay the minimum on their credit card (38%) than the rest of the country (34%).
Georgetown, South Garolina | Wikipedia.org
2.73 correct answers
Residents of Kentucky aren’t great at making ends meet. They’re just as likely to spend less than their income as they are to break even (39% both) and they are far more likely than the rest of the country to have medical debt (35% compared to 26%). And yet, they are more likely to pay their credit cards off in full.
Downtown Lexington. Wikipedia.org
2.73 correct answers
Texans are roughly on par with the rest of the country when it comes to the percentage that spends less than their income, but they are more likely to have medical debt and less likely to have a rainy day fund.
Riverwalk in San Antonio.
5. New York
2.72 correct answers
The state may be home to Wall Street, but residents of New York state aren't very good with their money. A larger percentage of New Yorkers are savers compared to the rest of the country, they’re less likely to have medical debt and more likely to have a rainy day fund. Unfortunately, they’re also more likely to just pay the minimum on their credit cards and more likely to have an underwater mortgage.
2.71 correct answers
Residents of Ohio were more likely to just pay the minimum on their credit cards and more likely for their mortgage to be underwater compared to the national average (19% vs. 14%). They did a lot worse on the financial literacy test than in 2009. This time 67% answered three or fewer correctly, compared to 59% in 2009.
Cincinnati | Wikipedia.org
2.70 correct answers
In Arkansas the residents are more likely to break even (38%) than they are to spend less than their income (37%). And they’re only slightly more likely to pay credit cards off in full (43%) than just the minimum (41%).
2.67 correct answers
The spending vs. saving habits of the residents of Louisiana are the same as the people in Arkansas, which is to say, worse than the rest of the country. However, they are less likely to pay credit cards off in full (38%) than just pay the minimum (39%).
Bourbon Street in New Orleans. Copyright Chris Litherland.
2.53 correct answers
Residents of Mississippi are more likely than the rest of the country to spend more than their household income (22% vs. 19%) and far more likely to be carrying medical debt (41% vs. 26%). However, they are more likely not to be underwater (82%) vs. 79%).
Downtown Jackson. Flickr.