Alternative Finances

The Geography Of Payments’ Responsibility

Everyone knows the three rules for investing in real estate.




That rule is stated in a variety of ways of course — “Buy the worst house in the best address,” or “Purchase a zip code, not a home” — but the gist is always the same, buying a “where” as opposed to a simple “what” means that the relative position of a location is just as important as the location itself.

Or, if you’d prefer to learn your life lessons from Monty Python: Don’t build a castle in a swamp.

In summary, the moral of the story is picking a bad location has bad consequences. At best, your castle will sink into the swamp, at worst it will catch on fire, tip over on its side and then sink into the swamp — but what won’t happen is anything good.

However, a new study by GoBankingRates indicates that there might be a new rule real estate watchers can apply to their evaluations of property: how financially responsible the neighbors are.

Their research shows that where exactly one lives in the U.S. has a tremendous effect on how likely they are to pay back their debts, take out payday loans, receive instruction in financial planning or save money for rainy day. In their annual Money-Savvy State Survey, GoBankingRates analyzed state-level data in three categories: use of banking services, saving and investing behavior, and financial education policies.

Some of the results are exactly what you would expect. Others are … somewhat surprising.


But, without looking at the map, and if one were to assume that the poorest states would fare the worst in an assessment of financial habits, that assumption would pretty much be on point.

America’s poorest states, according to 24/7 Wall Street, are Mississippi, West Virginia, Arkansas, Alabama, Kentucky, Tennessee, Louisiana, New Mexico, South Carolina and Montana.

The Top 10 states for worst financial habits, according to GoBankingRates, are Mississippi, Arkansas, Nevada, Kentucky, Oklahoma, Kansas, Alabama, District of Columbia, South Carolina and Ohio. Five out of 10 overlap with the Top 10 poorest. If one includes the Top 20 states for bad financial habits, the lists have an 80 percent overlap.

The worst performing places all tend to share a population that lacks access to traditional banking services and a general unlikeliness to having savings or emergency savings to deal with an emergency. They also, likely due to lack of access to normal financial services and lack of ability to save, tend to cause a higher than statistically average use of high interest short-term loan products.

Mississippi: America’s worst performing state across a variety of metrics typifies the problems. Close to half (47.3 percent) of Mississippi households are underbanked and unbanked, the highest percentage in any state. Mississippi households also have the highest rate of using alternative financial services (40.5 percent) and the second-lowest rate of savings account ownership (46.9 percent).

Interestingly, Mississippi does diverge from the bottom performing states in financial education; Mississippi ranked better than average on the amount of financial education its citizens receive.

At least they seem to recognize the problem.


The poor state/poor financial habits correlation does not reverse that well, as rich states do not necessarily reflect a great performance with respect to financial habits. The 10 richest states are Maryland, New Jersey, Alaska, Connecticut, Hawaii, Massachusetts, New Hampshire, Virginia, California and Minnesota.

The 10 states with the best financial habits are Wisconsin, Michigan, Idaho, New Jersey, South Dakota, Virginia, Minnesota, Utah, New Hampshire and North Dakota.

[What happened to Massachusetts and California, we ask?]

The overlap in the Top 10 is 40 percent; if one adds in the Top 20, it goes to 50 percent.

North Dakotans lead the pack, as they are the people in the United States most likely to start learning about financial responsibility at an early age. And, because they are by far the best savers in the U.S., 75 percent of North Dakota residents have a savings account and 46 percent have emergency savings, the report found. Only 23 percent of households said they are unbanked or underbanked, according to the report.

The top financial habits list also has some surprising crossovers with the poorest state list. Both North Carolina and New Mexico are in the bottom 10 rated for state wealth – but both states were in the Top 20 for good financial habits.

Also somewhat surprising, New Hampshire and Vermont. Vermont did not make the Top 10 richest states but it is a Top 20 player for state wealth, according to 24/7 Wall Street. It is also a Top 20 player for worst financial habits, as financial education in Vermont is not common, and savings accounts have not so much caught on.


New Hampshire, despite an official state motto of “Live Free or Die,” is extremely enthusiastic about mainstream banking. Seventy-eight percent (78.1 percent to be precise) of residents are fully banked and there is very low use of alternative financial services (15.9 percent). The state also has a strong ranking in the saving and investing category due largely to its high rate of enrollment in retirement plans (84 percent) and a larger portion of households that live within their means (81 percent).


It is difficult — though not impossible — to manage having no money well, but having lots of money doesn’t always mean that one will be good at managing it.

And that maybe people seem to be more likely to save money if they live someplace cold, given that 80 percent of the Top 10 money-saving states are in the chillier half of the United States. Perhaps we have more in common with squirrels — who stock away nuts when the weather changes — than we like to admit.


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