I love tests, polls, charts and most financial things. So when WalletHub released its report on the most and least financially literate states in 2022, I was intrigued. Living in Texas, I immediately scanned the list to see our ranking. 23rd. Well, at least we were (barely) in the top half.
Still, it looked like we were mediocre at best. But since the devil is in the details, I dug deeper to see what there was to see.
It appears that the ranking is based on three areas of measurement: the “WalletLiteracy Score” (an exclusive survey conducted by WalletHub where they ask respondents financial questions) accounted for 50% of the score.
“Financial planning and habits” and “Financial knowledge and education” were each 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 and Education area, ranking 42nd.
Why this surprised me is that in financial planning and habits, we were in 8th place. How on earth did we fail the test, have poor knowledge, and end up being so good at 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 scores of WalletLiteracy and only two were in the top half of Knowledge & Education.
I dug deeper.
First, I went to WalletHub and took the WalletLiteracy test. Finance is my thing and I did well, got an A-minus. Some of the areas that might trip people up relate to how credit scores are calculated and the basics of financial aid and school loans.
I can understand why a lot of financially sound people don’t care how their perfectly sound credit scores are calculated and may not have had to worry about school loans (or that part of their lives is ahead or behind).
But not knowing these areas can have a serious impact on your WalletLiteracy score.
Then I looked in the area of knowledge and education. If a state has fewer college graduates and fewer people using online financial services, it is downgraded.
High school education in personal finance is also heavily weighted.
Whether these attributes translate to an adult being financially literate is a bit uncertain, as this measures learning attempt and exposure to learning – not whether it remains valid.
So yes, Texans could benefit from a few refresher courses in the facts and figures of personal finance. Our education system could better teach and expose our young people to personal finance throughout their schooling.
But when it comes to doing what needs to be done, 8th place isn’t so bad.
May Ukraine remain free.
Gary SilvermanCFP® is the founder of Personal Money Planning, LLC, a Wichita Falls retirement planning and investment management firm and author of Real World Investing.