Which States' Residents Are Dumbest (and Smartest) About Their Money

Inflation is hitting Americans hard in more ways than one. We’re wincing in the grocery store checkout line, taking a punch to the gut at gas pumps, and those looking to buy a home are probably somewhere in a fetal position. Now more than ever, it’s important to be smart about our finances. If you’re wondering how financially intelligent the people in your state are, WalletHub conducted a study to evaluate the states with the most and least financially literate residents, comparing them for such things as financial planning, knowledge, and education and good financial habits. Here’s a look at the 10 smartest and 10 dumbest states in terms of finances.

Related: Rampant Inflation Continues to Bust Consumers' Budgets

Since the federal government is the largest employer in Washington, D.C., it’s no wonder the region’s median household income of $88,31 is higher than 49 states, falling only behind Maryland. But that doesn’t mean those households spend their money wisely. The third-worst rating for financial planning and habits is here, and it encompasses some of the least sustainable spending habits in the nation. 

Related:24 Money-Saving Tools That'll Keep Your Budget on Track

Unlike high-earning D.C., New Mexico’s median household income is the third-lowest at just $50,822. To make matters worse, the state’s unemployment rate sits at 5.3% — the second-highest in the United States. But residents of New Mexico aren’t just struggling to find gainful employment or make a decent wage, the state ranks sixth from the bottom for financial literacy and financial planning and habits among residents.

Related: Important Steps to Take to Outsmart Inflation, According to Experts

Connecticut has the highest taxpayer debt in the nation, according to Truth in Accounting’s annual Financial State of the States 2021 report, which says the state’s $79.5 billion of debt plummeted during the pandemic as pension plan liabilities increased, surpassing investment income. Another study by WalletHub shows the overall tax burden here as seventh-highest in the country. All things considered, it makes sense that residents in the state rank fourth from the bottom for financial knowledge and education.

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No one really plans on getting a speeding ticket, or for their washing machine to break. But you can guard against surprise expenses by putting away for a rainy-day fund — apparently something more residents of West Virginia need to consider, since they have the third-lowest share of adults with emergency funds in the nation.

The lowest cost of living in the country could inspire residents to be responsible with their money. But Mississippi has the highest share of adults borrowing from nonbank lenders — likely due in part to the fact that they have the highest share of unbanked households. Residents here are notorious for their unsustainable spending habits. 

According to CNBC’s 2021 Top States for Business study, Alaska is America’s worst state for business — a not-so-coveted title it’s earned six times over the past 14 years. While the main reason is low oil production, which Alaska’s economy depends on heavily, it doesn’t help that residents have the lowest score in the nation for financial planning and habits.

Between a low cost of living and a low tax burden, Oklahomans should bask in financial prosperity. Alas, it has the lowest share of adults with money put away for a rainy day, and the third-highest share of unbanked households.

At 7.12%, South Dakota has one of the lowest tax burdens in the country, but it’s not tax trouble that causes residents to struggle with their financial intelligence. The state ranks second-worst for financial planning and spending habits — which means residents of South Dakota don’t typically follow a budget and tend to spend more than they earn.

Part of being financially responsible is having enough educational experience to secure a reliable job, but as the state with the fifth-lowest public high school graduation rate, Louisiana misses the mark. That’s not the only thing bringing down the state’s financial literacy score, though — Louisiana also ties with Mississippi for having the highest share of unbanked households.

You might think that Arkansans would be tight with money — the median household income is the second-lowest in the nation, at $50,540, and the poverty rate is fourth-highest. But residents fall in the bottom 10 in terms of financial literacy and financial planning and habits. They also have the lowest score for financial knowledge and education.

New Jersey might have the sixth-highest tax burden in the country, but that doesn’t mean residents aren’t smart with money. Residents rank within the top 15 for all three categories, and ties with Kentucky for having the fourth-highest public high school graduation rate. 

Many states lack the assets to pay their debt — not Minnesota, which owns more than it owes. Residents also rank high for financial knowledge and education and financial planning and habits. The state boasts the fifth-highest share of adults with money set aside for unexpected (yet very possible) additional expenses. 

Iowa ended 2021 with an extra $1.2 billion, the biggest surplus in the state’s history. Judging by the high level of financial responsibility among residents, the state has a pretty good chance of remaining in a good financial position for years to come. Iowa has the fifth-lowest share of unbanked households and seventh-highest score for financial planning and habits.

Maine’s residents are ranked the third-most knowledgeable about finances and the fifth-most financially literate. The state’s overall score is raised by the fact that it has the fourth-lowest number of unbanked households and the third-lowest share of adults borrowing from lenders other than banks.

The economic outlook here is second-best in the nation, according to the American Legislative Exchange Council, beaten only by Utah, and North Carolinians rank fifth-highest in terms of financial planning and habits — weighted by factors such as median credit score, the share of adults with money set aside for a rainy day, and the share of adults with college savings for their children.

New Hampshire has the third-highest median household income in the U.S., at $88,235, and the fifth-lowest tax burden, at just 6.41%. Residents rank highest in the nation in terms of financial literacy and financial knowledge and education, and the Granite State has the lowest share of unbanked households.

Coloradans crack the top 10 for all three of assessed categories, coming in at No. 4 out of 51  for financial literacy, 10th-best in terms of financial planning and habits, and ninth-most knowledgeable about finances.

Despite its residents ranking 39th out of 51 in terms of financial knowledge and education — plus a middle-of-the-road ranking of 23rd for financial literacy — Virginia’s overall score is enhanced by its residents having the highest score in the nation for financial planning and habits.

Like Virginia, residents of Utah fall near the bottom for financial knowledge and education. But the state has the third-lowest share of unbanked households, the second-best financial planning and habits, and the tenth-highest financial literacy score.

Residents of Nebraska are seemingly good at sticking to a budget and not spending more than what they can afford to: the state ranks third for financial planning and habits. Helping bring its score to the top is its place as sixth-best in terms of financial knowledge and education.

Related: States Where People Use Debt the Most Just to Survive