This Report Card creates an overall financial literacy and capability grade for each state. The report also creates state grades for 59 data points. The data point grades are used to generate a final state grade; category grades in financial knowledge, credit, saving and spending, retirement readiness and other investing, and protect and insure; and grades in six credit subcategories, including general credit, housing credit, auto credit, credit cards, student loans and other credit. In all, each state and the nation have as many as 71 different grades.

A linear curve grading system is used to generate all grades except the final state grade. The final overall state grade is the weighted average of the five category grades that were each calculated with a linear curve grading system. These five grades were averaged to create the equivalent of a state grade point average. The five category grades are similar to five course grades on a report card. When calculating each state’s final financial literacy and capability grade, the five category grades are averaged together based on the weightings assigned to each of the five categories, similar to a grade point average. By analogy, each data point used to calculate these final and category grades is like a grade on a test or a homework assignment used to generate a final course grade.

Linear Curves

For each data point, credit subcategory and category grade created in this report, a linear curve system was used. This system assigns a minimum grade of 55 percent (grade F) to the state(s) with the lowest or worst score and assigns a maximum grade of 100 percent (grade A+) to the state(s) with the highest or best score. Using a linear curve equation, all remaining states were given a grade scaled between these two extremes (see how this process works with an online calculator). For example, one data point used in this report is the number of consumers filing for bankruptcy per 1000 people. The state with the lowest, or best, bankruptcy rate of 0.6 was given a grade of 100 percent. The state with the highest, or worst, bankruptcy rate of 5.9 was given a grade of 55 percent. All other 48 states were given grades scaled between these two data points.

The linear distribution equation used is as follows:

Score = Scaled Maximum Score + ((Scaled Minimum Score - Scaled Maximum Score)/(State Raw Minimum Score - State Raw Maximum Score)) * (State Raw Score - State Raw Maximum Score)

Based on our methodology, the top or bottom of any linear curve cannot be set by a state that is missing any data points used to generate that curve and grade. Two states are missing data points. South Dakota is missing three data points (housing credit subcategory of the credit category) and North Dakota is missing two data points (student loans subcategory of the credit category). North Dakota had the best overall results in the credit category. Based on this rule, Minnesota, the state with the second best overall results in the credit category, was used to set the top of this particular linear curve grade calculation. The credit category grade is the only instance where a state with missing data was initially screened as the state with the best (or worst) overall result prior to the calculation of the linear curve grades.

For reasons that are explained below (or in the report), equal weighting of data points for grading purposes was not used in the overall final state grades, and in two category grades (financial knowledge and credit) and in one subcategory grade (auto credit) that is part of the credit category grade.

The final grade for each state comprises the weighted average of five financial literacy category grades. Given its importance, size and impact on the economy, the Credit category was given the largest weighting for the final grade (30 percent of final grade). Saving and Spending was considered the next most important category (25 percent of final grade). Retirement Readiness and Other Investing was given a slightly smaller final grade weighting than Saving and Spending because everyone spends money but far fewer adults are saving for retirement or investing (20 percent of final grade). Financial Knowledge (15 percent of final grade) and Protect and Insure (10 percent of final grade) were ranked fourth and fifth in weighting, respectively, not due to a lack of importance, but rather due to a paucity of data on these topics.

The weighting systems for these grades are listed below:

Categories Included in Final State GradeNumber of Data Points Included in Category GradeCategory’s Weighting in State’s Final Grade
Financial knowledge315%
Credit (this category also had six subcategory grades)3830%
Saving and spending925%
Retirement readiness and other investing620%
Protect and insure310%

Data Points Used for Financial Knowledge Category GradeData Point’s Weighting in State’s Financial Knowledge Category Grade
Mean number of correct answers on six financial knowledge questions50%
Offered and participated in financial education25%
Quality and availability of high school financial literacy education25%

Subcategories Included in Credit CategoryNumber of Data Points Included in Subcategory GradeSubtopic’s Weighting in State’s Credit Category Grade
General Credit1015%
Housing Credit1030%
Auto Credit415%
Credit Card515%
Student Loans415%
Other Credit510%

Data Points Used for Financial Knowledge Subcategory GradeData Point’s Weighting in State’s Financial Knowledge Subcategory Grade
Auto loan balance as a percentage of household income30%
Auto loan delinquency rate30%
Percent of adults with auto loans10%
Percent increase in auto insurance premiums due to bad credit30%