Have you ever watched the television show MythBusters? A couple of guys conduct tests on urban legends to see if they’re true or not, usually resulting in blowing something up with explosives. Because this sounds completely awesome, we wanted to bust some common financial myths that continue to circulate. Put on your safety goggles and buckle up—it’s time to blow up some financial falsehoods.
The best place for your money is in a savings account.
Granted, it’s better than keeping your money in a jar buried in the backyard, but only slightly. While it might feel safer having your money in a savings account, there are other financial products available that offer much better interest rates and are just as prudent. After setting money aside for an emergency fund, look at money market accounts, share certificates, or other investments to earn more from your savings.
Cash is king.
While paying with cash can be a good budgeting tool, it isn’t always the best way to pay. Credit cards are another option. Not only are they more secure, they’re instrumental in helping you build credit. It’s important to use them once in a while to establish yourself as a credit-worthy person. Also, there are some rewards credit cards that can earn you points and/or airline miles on purchases you’re already making.
I don’t earn enough to save.
Sure you do; you just need to pay yourself first. You can set up an automatic draft so that money is taken directly from your paycheck and put into a savings account. If you find that you don’t have enough money at the end of the month, it’s time to reevaluate your living expenses and spending habits, then cut back where you can.
You don’t have to start saving for retirement until you’re older.
This is the biggest mistake someone can make. While putting that precious lifeguarding money toward retirement when you’re 16 sounds ridiculous, just think—with compounded interest, your 30-year-old self could be sitting on a nice little nest egg. Start saving for retirement as soon as you get a job. It’s hard to think that far into the future, but setting aside that money while you’re young could pay dividends.
After you emerge from the debris of our financial myth busting, you can begin to make more sound financial decisions. Instead of accepting things as fact, it’s important to do your own research to determine the best financial path for your lifestyle and situation.