Financial literacy must be measured in two distinct ways. The first is knowledge and skills. Do I have the knowledge and skills necessary to make wise personal financial decisions? For example, you could test knowledge and skills with a formal assessment. However, someone could ace this exam and not make financially literate decisions.

The second, and hardest, part of financial literacy is behavioral change. I know I should eat more vegetables and fruits and exercise every day, but will I? Behavior is measured by your actions, not your knowledge. I know I should not drink and drive. I know that the odds are materially higher of being hit by lightning than having the Powerball winning numbers — but I still buy the lottery ticket. Behavior is measured by results like higher credit scores and lower bankruptcy rates, and whether credit card bills are paid off each month and savings have been set aside for a rainy day and retirement.

This report measures the financial literacy knowledge, skills and behaviors of adults nationally and for each state. As you will see, many adults lack financial literacy knowledge and/or exhibit behaviors that suggest poor or, perhaps, uninformed choices.

In this report we measure each state's overall level of adult financial literacy using 59 state-specific data points from 18 different organizations. The report also includes state grades for five financial literacy categories: Financial Knowledge, Credit, Saving and Spending, Retirement Readiness and Other Investing, and Protect and Insure. The Credit category, which has by far the largest amount of data measurements, is further broken down into six subcategories that are also graded: General Credit, Housing Credit, Auto Credit, Credit Cards, Student Loans and Other Credit. Each state also receives a grade for each of the 59 data points. In all, this report contains a total of 71 different state-specific grades on financial literacy topics. Our new report uses a relative grading system. Thus, if a state receives a good grade, it may only mean they are the best in a class of poor students. The grading system in this report gives the best state a score of 100 (A+) and the worst state a grade of 55 (F). All other states are given grades scaled between these two extremes, using a linear curve grading method.

If all other states had lower percentages, does a state really deserve an A if only 29 percent of its adult population took a personal finance course in school, college or the workplace? We found this kind of low performance among leading states with regard to paying the minimum monthly payment on credit cards, the ability to come up with $2,000 in an emergency, and many other financial literacy metrics.

So it is important to remember that every state in our nation has dramatic room for improvement on the items measured in this report. We want to remind every state that grading on a curve will result in some grade inflation. Please avoid complacency in your state with regard to the issues raised in this report. Looking better than your peers should not be an excuse for maintaining things as they are today.