Above average financial savvy, but just barely

Dozens of financial surveys land in my in-box each year. And when the results are broken out by state, Minnesotans typically land near the top. Take the Financial Capability Survey released earlier this month by the FINRA Investor Education Foundation. In that survey, which takes a state-by-state look at Americans' money behaviors and financial know-how, Minnesotans had the second-highest score on a financial literacy quiz in the nation, behind New Hampshire. State residents also rated highly in several areas, including use of credit and retirement planning.

But why, in the land of Lake Wobegon, are money smarts above average?

Experts agree that having a more educated workforce with comparatively higher incomes helps. Workers who earn more will hopefully rely less on credit, save more for retirement and have less need for pricey alternatives to banks such as payday lenders.

Others believe culture plays a role.

"People here, they want to take care of themselves, they want to save money, they're conservative by nature," said Mark Heurung, managing partner of Northwestern Mutual in Minneapolis.

While Minnesota's makeup is becoming more diverse, you can't ignore the state's northern European roots. Some cultures tend to have traits that would make them better money managers. Of course there are always exceptions, but in general, Germans are known to be frugal and debt-averse. And competitive, which might cause them to work harder to earn more, hypothesized Kenneth Doyle, a mass communication professor at the University of Minnesota who studies financial psychology. As for the Scandinavians? They're "pretty conservative, cautious," said Doyle, who is researching financial differences among cultures.

Then there's the matter of where the jobs are. David Vang, Finance Department chair at the University of St. Thomas Opus School of Business, calls Minneapolis "a financial capital of the Midwest."

And if Mom and Dad aren't so savvy, there are courses in school. While a stand-alone course on personal finance is not required in Minnesota high schools, business teacher and financial literacy advocate Jim Eisenreich said many schools offer one as an elective. Each year, he teaches up to seven personal finance courses at Eden Prairie High School. But the kids who need the class the most aren't always the ones who sign up. Eisenreich, who's Minnesota chapter president of Jump$tart Coalition for Personal Financial Literacy, worked with the group to write a position statement that supports changing state graduation standards to require a semester-long personal finance course in high school.

Room for improvement

While Minnesotans came out slightly ahead in many areas, there is still cause for concern. Once the margin of error is taken into account, the state's residents are just as likely as other Americans to spend more than they make, to have trouble paying the bills, and to be late on the mortgage. Although we have more residents with emergency funds than the national average, that's nothing to brag about: Six in 10 of us don't have a cash cushion. We're also less likely to comparison shop for auto loans, something Vang chalks up to the Midwestern tendency to be "very, very loyal."

So why is it that we can do very well on a financial quiz, but can't always put that knowledge into practice?

In a tough economy, sometimes the money just isn't there to create a cash cushion. Even if money isn't tight, humans don't always act rationally, whether we're talking about money or eating habits. Doyle says financial literacy surveys focus on questions of the head -- whether we understand important concepts such as compound interest, inflation and investment diversification -- not questions of the heart. Such surveys ignore the fact that our money behaviors are heavily influenced by emotions and social norms. And that we tend to side with instant gratification instead of long-term benefits, even though we know better.