Today is the two year anniversary of the D.R.E.A.M. Blog!!! It feels like just yesterday I was sharing the story about how the organization was founded. Over the last two years our blog has provided information on a host of financial literacy topics. We hope that you have learned a lot along the way. We look forward to continuing to be a leading source of personal finance information.
In celebration of our anniversary, I want to unveil something I have been working on for some time; our first annual financial literacy rankings by state. Our team has been digging through the data to determine what states have the highest financial IQ. Our rankings aim to provide an independent assessment of the state of financial literacy in America.
Inside the Rankings
We keep our data as objective as possible to provide our readers with an unbiased opinion. Our rankings and research highlight that although financial literacy is largely determined by individual demographic characteristics it may also be shaped by the state in which people reside.
Interesting results, four of the largest states, based on population, did not make the top 10: California, Florida, New York, and Texas. Also, states in the South and Midwest accounted for majority of spots in the top 10. Moreover, despite having a high density of wealth and some of the richest zip codes per capita, there was only one state in the Northeast represented on our top 10 list, New Jersey.
Alarmingly, 26 states currently have no education policy in place that includes financial literacy or personal finance education. Meanwhile, only 4 states mandate a designated personal finance or financial literacy course for high school graduation.
Behind the Numbers
Our rankings were derived using a proprietary formula which analyzed education policy in each state in addition to other metrics that measure one's financial literacy and financial behavior. (Let's face it, merely knowing the right financial practices is useless unless you are actually employing the knowledge)
We began with data from all 50 states. Our rankings measure states in three broad categories: Policy (33%), Literacy (26%), and Behavior (41%). Here's how the numbers break down:
State Policy: 33%We analyzed each states financial education policies utilizing information from the Jumpstart Coalition for Personal Financial Literacy and state government sources.
Financial Knowledge: 26%
We utilized the results from a financial literacy quiz administered to persons in all 50 states by the EBRI.
Financial Habits: 20%
Our research included analysis of results from a questionnaire administrated to persons by the EBRI regarding their financial practices.
We utilized data from a study conducted by the FDIC analyzing national banking sector participation.
Credit Card Debt: 7%
We analyzed data from one of the three major credit score bureaus to identify the average level of indebtedness per state resident.
About the Author: Femi Faoye is the Co-Founder and Chief Executive Officer of D.R.E.A.M. He's also the Founder of Millennial Capital Management, an investment management firm based in New York City. He’s a staunch and passionate financial literacy education advocate.
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