SUMMARY: Debunking common money myths can help you save, budget, and use credit wisely, leading to long-term financial stability.
Misunderstandings about money matters can develop early. It could stem from a lack of formal financial training in school or not enough personal teaching at home. These notions of complicated financial dealings persist, whether it’s from what you see on social media, hear word of mouth or, sometimes, read from seemingly credible financial experts. You start to believe the myths and feel that financial security is unattainable. It’s important to learn the truth behind basic financial principles. The knowledge will help you avoid losses, increase gains and make the most of your financial opportunities.
Start uncovering the mystery by setting the record straight on these five money myths:
1. Money myth: It’s not worth saving if I can only save a small amount per month.
The truth is: It may seem pointless to put money away if you have just a few dollars left after paying bills. But a well-tested axiom argues otherwise. “There is an old saying that a penny saved is a penny earned,” said Jamie Fatheree, Financial Wellness Manager at American Airlines Federal Credit Union. “I don’t believe any amount saved is too small. It’s about building the discipline and growing your savings over time.”
2. Money myth: I’m too young, I don’t need to worry about savings.
The truth is: Solid arguments support the idea that it’s never too early to begin putting away money. Saving accounts are important at a young age. “Firstly, starting young builds the discipline so [saving] becomes second nature as you get older and earn more,” Fatheree said. “Secondly, the power of compound interest is on your side. Saving early allows more time for savings to grow with added dividends with compound interest.”
Furthermore, the bigger your dreams, the more important it is to start early, because it can take time to accumulate a sizable sum. “Most people dream of purchasing a home one day, but that dream isn’t getting any less expensive, and for those who are unprepared, it can feel like it will only ever be a dream,” Fatheree said. “Even if you’re not sure you want to purchase a home, or if that goal is many years away, if you save early, you’ll be prepared and that dream can more easily become a reality.”
3. Money myth: I cover my bills each month, I don’t need to budget.
The truth is: Budgeting can generate benefits even if you’re not having trouble making ends meet. “A budget isn’t just about paying monthly bills,” said Fatheree. “A budget helps you gain control of your finances so you can be sure your spending matches your financial priorities. People who don’t budget will often say that they have no idea where their money goes every month. A budget allows you to be very intentional about how you spend and save your money.”
4. Money myth: All debt is bad.
The truth is: “Debt can be good when it's used to achieve a financial goal, like buying a home, starting a business or getting an education,” said Brenda Moore, a counselor in the Financial Wellness department at the Credit Union. “Buying a home and paying for college are examples when it can be beneficial to take on debt. “Good debt can also help you build wealth or increase your income,” she said. “Taking on manageable debt is a good strategy for developing a strong credit profile.”
5. Money myth: Never use a credit card to pay.
The truth is: It’s OK to use your credit card to pay for optional niceties like a vacation or even everyday purchases while striving to pay off your debt every month. However, if you do need to carry a balance, it’s wise to go with a card with a lower interest rate. Also, credit cards can help you build and strengthen your credit score while offering convenience and security superior to cash. Many cards offer rewards — even cash back — as well as flexible repayment options.
“Credit cards can be great for earning rewards on monthly purchases when the bill can be paid off every month,” Moore said. “For instance, if you pay utilities, purchase groceries and pay for fuel on a reward card while saving your cash in an interest-bearing savings or checking account — and then pay the balance in full each month, you create a double win. You get rewards on the credit card and you earn a little interest on the money you saved until the credit card bill was paid.”
Financial stability is attainable. Don’t doubt your ability to become more knowledgeable about your money. Consult with accredited financial experts and research reputable information from authoritative sources. Your financial future will be glad you did.
