Not all cities are alike when it comes to personal finance acumen among their residents, and personal finance site WalletHub recently concluded Lancaster, Texas and Indiana, Pa. "have the worst money-management skills" in the U.S.
WalletHub measured the best and worst American cities at personal finance skills, using a set of metrics to rank cities based on key money issues like credit score, average number of late bill payments, and mortgage debt-to-income ratio, among other criteria.
"Cities that ranked highly for money management skills have low debt to income ratios, whether it's credit card debt, mortgage debt, car loan debt or student loan debt," says Jill Gonzalez, an analyst at WalletHub. "These cities also have high credit scores, reflecting that residents successfully manage their debt and pay their bills on time, usually paying in beyond the minimum to be free of debt more quickly."
Using that formula, California comes out looking good in the WalletHub rankings.
Four of the top five cities listed as having the savviest money management residents come from the Golden State (the fifth comes from Massachusetts, with Lexington, Mass.) There's no clear stand out on the low end of the scale, with cities from Pennsylvania, Maryland, Washington, and Michigan (twice) all listed in the bottom five.
Some cities have residents who have one personal financial category where they do particularly well -- or poorly.
For example, WalletHub notes that Athens, Ohio, falls flat on its face: it has the highest credit-card debt-to-income ratio, at 113%, which is 23 times greater than in Cupertino, Calif., the city with the lowest, at 5%.
Then there's Alice, Texas, which has the highest average number of late bill payments, at 6.96%. That is 16 times greater than in Saratoga, Calif., the city with the lowest rate of late payments, at 0.45%.
"The cities toward the bottom of the list are struggling when it comes to money management," Gonzales adds. "Most of them are college towns, where students have yet to understand how personal finance works. A third of college students admit that they are not aware of late-payment fees, which is not surprising since only 17 states require high school students to complete a personal finance course."
Is it really possible to classify an entire region as money smart of money stupid?
Some finance industry professionals aren't so sure you can throw a net over good or bad money managers in any city. "It's not fair to indict an entire region, or even city, for bad financial practices when personal finances don't exist in a vacuum," says Michael Catania, co-founder of PromotionCode.org. "Here in Las Vegas, personal finances are inextricably entangled into other aspects of the community, namely education levels and opportunities for economic advancement."
"Where there is a less educated workforce, there are fewer types of jobs, and with the lack of diversity in employment opportunity comes more competition for the jobs and a corresponding decrease in wages," he added. "In turn, employees make less money and are forced to make more difficult decisions with their personal finances than in areas where there is more opportunity for advancement."
Still, it really can't hurt to remind any group of consumers, in one city or many, that paying bills late and owning a low credit score is a recipe for financial stress.
Just don't expect any downtown parades over being named one of the most financially illiterate cities in the U.S.