Best and Worst States for Financial Literacy in 2023

How much do your money smarts depend on where you live?

Turns out, state policy can determine whether or not individuals receive adequate financial literacy education.

To determine how well each state supports financial literacy and resilience The Penny Hoarder examined state-level programs, policies and residents’ general financial well-being through 27 evaluation criteria to rank states from best to worst.

Here are the results.

The Best States for Financial Literacy

The 10 best states for financial literacy all received scores above 70% overall.

The Worst States for Financial Literacy

The bottom states for financial literacy scored between 40% and 50% overall.

How Can You Measure Financial Literacy?

Financial literacy is how much someone understands basic money management concepts that lead to building savings and wealth throughout a lifetime. These include knowing how to balance a checkbook, paying down credit card debt and applying for a mortgage. Plus, it’s important to understand inflation, budgeting, compound interest and investing strategies.

Short of asking every American if they know the difference between a FICO score and VantageScore, we focused on how states support financial literacy at a policy level.

• Are they offering courses for students in high school and college, providing easily accessible resources for adults and supporting consumer protections like legislative limits on predatory lending?

Financial literacy isn’t just about understanding key financial topics. It’s also important to be financially resilient, which means being able to withstand financial downturns.

• Financial resiliency became important to policymakers during the 2009 Great Recession.
• Since then, research on financial literacy has created a push to require financial literacy courses in the classroom.
• Recently, the COVID-19 pandemic and economic downturn led to many Americans losing their jobs or taking a pay cut, which impacted their financial resiliency.

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Ranking Factors for Financial Literacy

The six ranking factors we used to evaluate states on financial literacy comprise 27 total evaluation criteria including credit scores and historic unemployment in each state. From there, states received a score in each individual category, and then the scores were weighted based on the importance of the category.

Our scoring breakdown for each state is:

• Personal Consumption (Weight = 25%)
• Earning (Weight = 10%)
• Knowledge (Weight = 2.5%)
• Investing and Savings (Weight = 2.5%)
• State Policy (Weight = 50%)
• Resilience (Weight = 10%)

The weighted scale allowed the evaluation of each state to be based on criteria related to policy and programs instead of individual financial success.

Consumption (25% of score)

Consumption measures the general financial well-being of a state’s population.

• We included data points such as FICO credit score, credit card debt, bankruptcy rates and homeownership rates.
• We also included the average APR for payday loans; states with lower APRs received more points.

Earning (10% of score)

Individual earnings are an important part of the score because state policies can influence earnings for marginalized groups. The median household income across all 50 states is $66,644.

• We also looked at disparities among white, Black, Native American, Asian-Pacific Islander, Hispanic/Latino and multiracial populations, as well as disparities between male and female earnings.
• Pay disparities were calculated based on how many cents to the dollar a marginalized group made compared to the average white man.

Decreasing wage disparities has the potential to increase financial resiliency among a state’s entire population.

Financial Knowledge (2.5%)

We looked at self-reported knowledge of financial literacy reported in a survey by the Financial Industry Regulatory Authority’s educational arm. The focus was on knowledge about four key financial terms.

• 54% of respondents understood inflation.
• 70% of Americans understood compound interest.
• 71% of people surveyed understood mortgage interest.
• Only 25% of Americans understand bonds and how interest rates affect bond prices.

Investing and Saving (2.5%)

We focused on data points such as average retirement savings to understand investing and saving rates in each state. The average retirement savings amount across all 50 states is $427,918.

In eight states, mandated retirement plans are available, according to ADP, Inc. This means that states require employers to provide retirement savings opportunities through savings vehicles such as a Roth IRA with payroll deductions.

• In total, 13 states have signed state-mandated retirement plans into law. Five of those states have scheduled implementation of retirement plans.
• An additional two states have passed the law but have not scheduled implementation of the retirement plan yet.

State Policy Around Resilience and Education (50%)

We weighed state policy the most heavily, as it best indicates what states are doing to support financial literacy.

We looked at Next Gen Personal Finance’s 2023 State of Financial Education report, which measures the number of students in each state required to take a financial literacy course to graduate from high school, as well as the number of students who had access to a stand-alone financial literacy course.

• Thirty-three states — or 66% — do not require students to take a standalone financial literacy course to graduate.

• Less than half of all American students (43%) have access to financial literacy courses.

We also looked at policies that limit or ban predatory payday loans, as well as states that automatically contribute to or match contributions to college savings funds.

• 23 states have limited payday loan safeguards while only 18 states have laws to prohibit payday loans or set low-interest rate limits.
• To help families save for college, 16 states offer free money through 529 Savings Plans, up to $5,400.

Finally, we looked at the average minimum wage in each state, with states with higher minimum wages receiving more points.

• 46 states have set a state minimum wage.

• The average state minimum wage is $10.41, which is more than $3 above the federal minimum wage.

Financial Resiliency (10%)

Lastly, we examined the overall financial resiliency of each state’s population.

We looked at the affordability index for each state and found that Mississippi was the most affordable state while Hawaii was the least affordable state.

• The most expensive regions to live in the U.S. were in the northeast and west coast, plus Hawaii and Alaska.
• The least expensive areas were the midwest and southern states.

Examining historical unemployment data from January 2000 – January 2023, we found the historical U.S. average unemployment rate was 5.47%.

• North Dakota had the lowest historical unemployment rate at 3.10%.
• Nevada registered the highest historical unemployment rate at 7.20%.

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How States Scored for Financial Literacy

The Top States for Financial Literacy

Each of the 10 best states for financial literacy excels at something different.

New Hampshire (#1), Connecticut (#8) and New Jersey (#9) score the highest for investing and saving while Maryland (#7) and Georgia (#5) have the best earnings in the country. Virginia (#2) scored the highest out of any state for policies supporting resilience and education, with Nebraska (#3) and Ohio (#6) close behind.

• Two states in the top 10 — Maryland (#7) and Connecticut (#8) — have state-mandated retirement programs.
• Only one state in the top 10 — Nebraska (#3) — received a perfect score for financial resilience.

But even the top-ranking states have room for improvement. Virginia (#2), Nebraska (#3) and North Carolina (#4) all reported low earnings. Nebraska (#3) and Rhode Island (#10) scored low for investing and saving. Georgia (#5) surveyed in the bottom percentile for financial knowledge.

But all of the states in the top 10 reported policies that support education and resilience, receiving a passing grade. And every top-10 state also scored well for overall general financial well-being.

The Bottom States for Financial Literacy

The 10 worst states for financial literacy did not achieve a passing grade.

While we can’t say that financial illiteracy is rampant in these states, we do know that they do not offer well-rounded state programming, policies or education supporting financial resilience and literacy.

Delaware (#44) and Nevada (#50) scored the lowest out of any state for policies supporting resilience and education. Louisiana (#48) also scored the lowest of any state for financial knowledge.

• Hawaii (#41) and California (#49) do not have a great track record with financial resilience.
• Idaho (#46), Kentucky (#47) and Nevada (#50) are all tied as the worst states for general financial well-being.

On the other hand, Texas (#42), Indiana (#43), Idaho (#46) and Louisiana (#48) all do well with affordability and have low historic unemployment rates. California (#49) is the only state in the bottom 10 that has a state-mandated retirement plan. Alaska (#45) prioritizes investing and saving and Hawaii (#41) has strong financial well-being.

• Delaware (#44) is close behind for both financial well-being and investing and saving.

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What Can States Do to Support Financial Literacy and Resilience?

In our research, we found that states have a lot of power to support financial literacy and resilience. Requiring financial literacy education, limiting payday loans and mandating a livable minimum wage could vastly improve the financial standing of many constituents.

Require Financial Literacy Education

Most states in the U.S. (66%) do not require financial literacy education for students. Adding in a required course for high school students increases the likelihood of financial resilience and literacy in adulthood.

However, while most states do not require financial literacy courses, many offer the course as an elective in high school.

• We found that 78.7% of students have the option to take a financial literacy course.
• However, only 43% are required to take a financial literacy course to graduate.

Limit Payday Loans

Payday loans are generally short-term, high-cost loans for $500 or less that are paid back to the lender when the borrower receives their next paycheck. But many borrowers renew the loans repeatedly, causing their debt to snowball.

Currently, 23 states do not have any protections for payday loans. That means lenders can charge exorbitant fees and interest rates to borrowers who need cash quickly.

• In Idaho, a $500 payday loan costs $1,000 with an average APR (annual percentage rate) of 652%.

An easy fix is to follow the 18 states that have “strong laws that prohibit payday loans or set low interest rate limits,” as The Pew Charitable Trusts noted.

• Payday lenders do not operate in those 18 states.

Mandate Livable Minimum Wage

The federal minimum wage has been stagnant at $7.25 an hour since 2009. If it were keeping pace with inflation, it would be $10.33 now. While many states have raised their minimum wage since then to an average of $10.41, it’s still not a livable wage in the current U.S. economic climate.

• 18 states have also scheduled annual minimum wage adjustments based on the cost of living and previous state-wide votes.

An analysis by Amy Glassier, professor of Economic Geography and Regional Planning at MIT, found that a minimum wage of $25.02 would be sustainable for a family of four with two working adults and two children. Yet Oxfam America reports that 31.9% of Americans earn less than $15 an hour.

• That’s an increase of 245% from the current federal minimum wage.
• A $25.02 minimum wage would equal an income of $104,077.70 per year.

Mandating a livable minimum wage would allow people to work and save money, increasing their financial resiliency in the event of an economic downturn or emergency.

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Resources for Financial Literacy

If you’re living in a state that’s not supporting financial literacy, you may be wondering how you can actually learn how to be financially literate. Turns out, you don’t need a high school course — although, that sure helps.

The Penny Hoarder has resources that are accessible now and free to use.

• Credit score reports can be tricky to understand, but they’re important if you want to get a loan or buy a house. Here’s what’s in a credit report.
• What is a good credit score? We’ve got the lowdown.
• Saving money for retirement is key to securing a strong financial future. Get started today with our guide.
• Paying off debt is one of the first steps toward financial resiliency. But how can you pay off credit card debt? We’ve got some ideas.
• Looking for advice on how to budget? We’ve got a five-step guide that can help.
• Ready to be an insider? Sign up for The Penny Hoarder newsletter for financial tips each week.

We also found government resources:

• Interested in learning more about auto loans, home refinancing and everything in between? Tools and tips from the Consumer Financial Protection Bureau can help.
• The National Credit Union Administration has a whole page with financial literacy resources and guidance.
• Looking for more resources? The Office of the Comptroller of the Currency has a whole resource directory for financial literacy.

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Full Ranking of Best and Worst States for Financial Literacy

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Methodology

The Penny Hoarder evaluated all 50 states using 27 evaluation criteria organized into six categories: personal consumption, household earnings, financial knowledge, personal retirement savings, state policy supporting financial literacy education and economic resilience of residents. Every state received a score for each category, and those scores were weighted based on the importance of the category to the analysis. The sum of weighted scores for each category resulted in the final score that we used to rank states.

Our rankings do not prove a causal relationship between financial literacy and resilience, and we are not judging the financial literacy of individuals who live in the state. We are evaluating what each state is doing to help lift the financial well-being of its residents through financial literacy education and supporting policy. Our rankings assume that state policy requirements for financial literacy education will generally lead to the financial well-being of the state’s residents over the long-term.

Sources

Personal Consumption: Experian: Average U.S. credit score, Lending Tree: Credit card debt by state, American Bankruptcy Institute: January 2023 statistics, Pew Charitable Trusts: Payday loan type, regulation, and APR, U.S. Census Bureau: Housing vacancies and homeownership and Empower: Average retirement savings by state.

Earning: U.S. Census Bureau: 12-month median income, U.S. Department of Labor: Earnings disparities by race and ethnicity, U.S. Department of Labor: Earning disparities by sex and Center for American Progress: State salary range transparency laws.

Knowledge: Financial Industry Regulatory Authority (FINRA) Foundation: National Financial Capability Study (NFCS) 2021 state by state survey.

Investing and Saving: Empower: Average retirement savings by state and ADP: State mandated retirement plans.

State Policy: Next Gen Personal Finance: 2023 state of financial education report, Pew Charitable Trusts: Payday loan type, regulation, and APR, CNBC: 529 college savings plan, Pew Charitable Trust: State college savings account and U.S. Department of Labor: Consolidated minimum wage table by state.

Resilience: Missouri Economic Research and Information Center: Cost of living data series and U.S. Bureau of Labor Statistics: Average historic unemployment rate.

Alex Kerai is the consumer trends reporter for Clearlink, the parent company of The Penny Hoarder. The Penny Hoarder’s Chris Zuppa, multimedia content creator, and Frannie Comstock, digital PR and marketing manager, also contributed to this report.