Investors in some states have a lot to learn when it comes to investing and financial literacy, says a recent study by the Financial Industry Regulatory Authority (FINRA).
According to the study, residents of California, Massachusetts and New Jersey are the best at handling their money. By comparison, individuals in Mississippi, Arkansas and Kentucky rank at the bottom of the list.
“This survey reveals that many Americans continue to struggle to make ends meet, plan ahead and make sound financial decisions – and that financial literacy levels remain low, especially among our youngest workers. No matter how you slice and dice it, this rich, new data set underscores the need for us to continue to explore innovative ways to build financial capability among consumers,” said FINRA Foundation Chairman Richard Ketchum.
Overall, the number of respondents demonstrating a high degree of financial literacy – meaning they correctly answered four or five of the five questions about financial knowledge – dropped to 38% in 2012, from 42% in 2009.
About half of survey respondents said they worked with a financial professional in the past five years. However, they still lacked knowledge of key financial market concepts, the study found.
For example, only 28% correctly answered a question about the movement of bond prices, compared with interest rates. Less than half correctly answered a question about the risk of a single company stock versus a diversified mutual fund.
Study responses were collected through an online survey of 25,509 American adults (approximately 500 per state, plus D.C.), over a four-month period from July to October 2012. The sample used in the study was weighted by age, gender, ethnicity and education. The full data set, questionnaire and methodology are available here.