Texas ranked seventh nationwide for high school financial literacy, according to a recent WalletHub study.
“This means that Texas high school graduates are among the most financially literate in the country,” said Jill Gonzalez, an analyst with WalletHub. “Texas has personal finance components embedded into K-12 standards for each grade. Students are required to take at least one personal finance course”.
Outside of high school, the state of Texas ranked 23rd for overall financial literacy. The WalletHub 2022 Most and Least Financially Literate States study ranked the Lone Star State at 23rd due to its high borrowing ranking from non-bank lenders and only 60% of households following a budget. Nebraska ranked No. 1 in overall financial literacy.
“Nebraska has a low share of adults paying only the minimum on their credit cards at less than 30%, the highest high school financial literacy grade, and its students are required to take at least one personal finance course,” Gonzalez told The Dallas Express. “Nebraska also has a large share of adults using online financial services at almost 75%.”
The WalletHub study determined that 46% of Texas residents have a rainy-day fund, compared to 48.28% of Nebraska residents.
“People should have rainy-day funds to cover expenses for 3 months in case of illness, job loss, or other emergencies,” Gonzalez said.
The study also found that Texans engage in a few bad financial habits, such as overspending.
“The danger in spending more than you earn is getting into too much debt that you can’t pay off,” Gonzalez said. “This can have devastating long-term effects on your financial situation and could ultimately lead to bankruptcy.”
The share of Texans who spend more than they earn is 21.41%, compared to Nebraska’s 18.27%, according to the WalletHub data.
“We don’t know the exact reasons why people spend more than they earn,” Gonzalez said in an interview. “It could be the lack of financial knowledge or the lack of healthy financial habits or planning.”
To help Texans become more financially literate, Gonzalez added that Texas authorities should invest in financial literacy and make it a priority.
“Aside from financial literacy classes in schools, there should also be tests required for this subject,” she said.
Texas ranked No. 49 for the share of adults borrowing money from non-banking lenders, indicating that Texans engage in this behavior more than most others.
According to Gonzalez, borrowing money from non-bank lenders is included as a factor because it speaks to people’s financial habits and planning.
“Non-bank lenders typically have higher interest rates than bank lenders and offer less advantageous credit terms,” she said. “This is why borrowing money from them is not a good idea.”
The study further found that 39.43% of Texans pay only the minimum on their credit cards.
“It’s important to pay your credit card bill in full every month and not just the minimum in order to not have to pay interest,” Gonzalez added. “At the same time, paying your credit card bill in full and on time lowers your credit utilization ratio and helps improve your credit score.”
