Iowans Financial Literacy Higher than Most
By Dave DeWitte, Reporter
CEDAR RAPIDS, Iowa -- Iowans stack up better than residents of most other states in financial literacy in a recent study, although they aren’t among the nation’s leaders.
The Employee Benefit Research Institute study attempted to isolate institutional factors within each state, such as educational programs, that result in better or worse financial literacy. Southern states tended to lag northern and western states in financial literacy.
Residents of New Hampshire, Minnesota Idaho, Washington, Colorado and Wisconsin performed best in both segments of the study.
Louisiana residents performed the most poorly, followed by residents of Mississippi, Arkansas, Tennessee and West Virginia.
Iowa residents landed in the upper one-quarter of the states. They ranked 11th in the results of a survey on financial capability, and 17th on a survey of financial behavior.
The study attempted to isolate factors such as educational and income levels to equalize disparities in those areas between the states. It found statistically significant links between state of residences and performance on the surveys after adjusting for those actors.
Relationship between financial literacy and state of residence was mostly limited to the low-ranking states. Howeer, in the case of financial behavior, the study found a significant relationship between residency-related factors for all states. The chances of exhibiting worse financial behavior increased as the ranking of the states dropped, suggesting a reason for state policies to help improve financial literacy in order for residents to have a secure retirement.
The institute said it conducted the study in part because of the shift from fixed-benefit retirement plans such as military pensions to fixed-contribution retirement plans, in which the employee’s decisions about how much to set aside and where to invest it govern the amount they save up for retirement.
A financial literacy survey asked questions such as “If interest rates rise, what will typically happen to bond prices?” Financial literacy requires both the ability to understand the concepts of finance, such as compound interest, and the ability to do the arithmetic, the institute said.
The financial behavior survey asked questions like “In the past 12 months, have you obtained a copy of your credit report (or) checked your credit score?”
The data used in the study was taken from the National Financial Capability Study designed by the FINRA Investor Education Foundation. It consisted of three linked survey, including a state-by-state survey of 28,146 adults that interviewed bout 500 people from each state.
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