Texas Ranked Amongst the Best and Worst for Financial Literacy
By Gary Silverman, CFP®
Listen to the article here: https://youtu.be/BDiTJ7_yCwI
I love tests, surveys, charts, and most things financial. So, when WalletHub came out with their report on 2022’s Most & Least Financially Literate States, I was intrigued. Living in Texas, I went immediately down the list to see our rank. 23rd. Well, at least we were (barely) in the top half. Still, it seemed we were mediocre at best. But given that the devil is in the details, I drilled down further to see what there was to see.
Seems the rankings are based on three areas of measurement: The “WalletLiteracy Score” (a proprietary survey done by WalletHub where they ask respondents financial questions) made up 50% of the rating. “Financial Planning & Habits” and “Financial Knowledge & Education” each was worth 25%. When I looked at the breakdown for Texas, I saw that we were dismal in the WalletLiteracy Score, ranking 47th and almost as dismal in the Knowledge & Education area, with a ranking of 42nd. Why this surprised me is that in Financial Planning & Habits we were in 8th place. How the heck did we blow the test, have lousy knowledge, and still end up performing so well when it came to actually doing the financial planning and habits? And it wasn’t just us. Of the seven states that scored above us in Financial Planning & Habits only one was in the top 10 WalletLiteracy scores and only two were in the top half in Knowledge & Education.
I dug deeper.
First, I went to WalletHub and took the WalletLiteracy test. Finance is my thing and I did okay, getting an A-minus. Some of the areas that might trip up people is in the realm of how credit scores are calculated and basics of financial aid and school loans. I can understand why a lot of fiscally sound people don’t give a poodle about how their perfectly sound credit scores are calculated and might not have needed to worry about school loans (or that part of their lives is way ahead or way behind them). But not knowing these areas can seriously impact your WalletLiteracy score.
Then I looked into the Knowledge & Education area. If a state has fewer college graduates and fewer people using online financial services, they are downgraded. High school level education in personal finance is also heavily weighted. Whether these attributes translate to a financially literate adult is a bit iffy as it measures the attempt at and exposure to learning—not if any of it sticks.
So yes, Texans could use some refresher courses in the facts and figures of personal finance. Our education system could do a better job teaching and exposing our young folks to personal finance throughout their schooling. But when it comes to actually doing what needs to be done, 8th place isn’t too bad.
Gary Silverman, CFP® is the founder of Personal Money Planning, LLC, a Wichita Falls retirement planning and investment management firm and author of Real World Investing.