State-by-State Financial Capability Study

FINRA Foundation Releases Nation's First State-by-State Financial Capability Survey
New Jersey, New York and New Hampshire Most Financially Capable, Kentucky and Montana Place Last
December 8, 2010

The FINRA Investor Education Foundation (FINRA Foundation) today launched a dynamic interactive Web resource to display the results of America's first State-by-State Financial Capability Survey.

It displays a clickable map of the United States and allows the public, policymakers and researchers to delve into and compare the financial capabilities of Americans in every state and across geographic regions. The State-by-State Financial Capability Survey, which surveyed more than 28,000 respondents, was developed in consultation with the U.S. Department of the Treasury and the President's Advisory Council on Financial Literacy.

The state-by-state survey found a significant disparity in financial capability across state lines and demographic groups: Young Americans nationally were more likely to be less financially capable than older Americans, and they were significantly more likely to engage in non-bank borrowing.

“This study highlights how important improving financial education is for Americans, especially during times of financial insecurity,” said FINRA Foundation Chairman Rick Ketchum. “While the current economic conditions can exacerbate the consequences of poor financial decisions, some states are still well ahead of others.”

The state-by-state survey echoed several of the findings of a smaller-scale national survey released in 2009, finding:

~ Over half of all Americans are living paycheck-to-paycheck.

~ 55% of Americans report spending more than or about equal to their household income.

~ A significant majority of Americans (60%) do not have a “rainy day” fund to cover 3 months of unanticipated financial emergencies.

~ More than one in five Americans (24%) have engaged in some form of higher cost non-bank borrowing during the last five years, including taking out a payday loan or getting an advance on a tax refund.

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The FINRA Investor Education Foundation supports innovative research and educational projects that give underserved Americans the knowledge, skills and tools necessary for financial success throughout life. For details about grant programs and other FINRA Foundation initiatives, visit www.finrafoundation.org. READ MORE !

Gauge your financial knowledge—take the quiz below and compare your score with the averages in specific states, regions or the nation overall.

1. Suppose you have $100 in a savings account earning 2 percent interest a year. After five years, would you have more than $102, exactly $102 or less than $102?

2. Imagine that the interest rate on your savings account is 1 percent a year and inflation is 2 percent a year. After one year, would the money in the account buy more than it does today, exactly the same or less than today?

3. If interest rates rise, what will typically happen to bond prices? Rise, fall, stay the same, or is there no relationship?

4. True or false: A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage but the total interest over the life of the loan will be less.

5. True or false: Buying a single company's stock usually provides a safer return than a stock mutual fund.