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10 money myths

The Top 10 Worst Money Myths You Need to Forget

There is a lot of misinformation surrounding personal finance. We’ll debunk the top 10 money myths.

It’s easy to become confused when wading into personal finance. We’ll show you what the biggest myths are and the actual truth about each. These are in no particular order.

1. Buying A Home Is Better Than Renting

I think this myth persists because it has long been part of the equally mythical “American Dream.” Finish college, get a job, get married, buy a house. And for many years, and still, in some cases, a home was a good investment. But owning a home is not for everyone from either a financial standpoint or a lifestyle one.

The Reality

If you are young and just starting out your career, renting is a better option. It gives you more flexibility to chase that dream job (or girl/boy) and is just less work. But it might be that buying a home is better than renting if you don’t plan to live in the home.

Becoming a landlord may be a better option for a young person with the money but not the lifestyle to own a home.

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Is Buying a House a Good Investment? It Depends…

2. You Have To Be Rich To Invest

It’s only guys in Brioni suits who drive Mercedes and have stock tickers in their penthouses who invest right? It’s not for people like us who take public transit and live in studio apartments.

The Reality

Anyone, even you, can invest. And it’s one of the best ways to grow your wealth. If you are starting from zero, sign up for a Betterment account. It’s the fastest, easiest way to get your feet wet in investing.

You don’t have to read, research, or ask around. You can get started today, right now. Once you’re comfortable, we can do all that rich person investing stuff. But it’s important to get started ASAP.

3.  Carry A Small Credit Card Balance To Increase Your Credit Score

Ugh, where did this come from? I hate this one. No! This is a no no! Whoever told you this probably also said the earth is flat and creationism is a thing. No! Bad!

The Reality

Pay off your balance in full every month. That is how you maintain good credit. There are some other ways to build and maintain good credit but leaving a balance, any balance, is not among them.

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A credit score is a 3-digit number that ranges from 300-850. It's used by financial companies to decide how likely you will pay back money they lent you.

4. I Don’t Earn Enough To Save

In some cases, this may be true. But not in many and probably not in your case. There are people making high six figures to your low five who believe this.

The Reality

Your problem is that you don’t pay yourself first. I understand. I used to do this too. I would say to myself, “Whatever is left at the end of the month, I’ll save!” Well, there was never anything left at the end of the month.

Of course, there wasn’t. I spent it all! Your good intentions will never pan out in this area. Instead, set up an auto-deposit into your Betterment account, or at least into your savings account. You can’t spend what you never had.

5. Invest In Gold

When the economy takes a significant downturn, some people will recommend buying gold. It’s safe; it’s a physical asset! Come to the zombie apocalypse, Armageddon, a Ted Cruise presidency; you will need gold!

The Reality

Gold is highly volatile. And if any of the above should happen, it’s probably best to have a lot of canned goods and bottled water with which to stock your bunker. Spend your money on that instead.

6. My Partner Manages Our Money, So I Don’t Need To Worry About It

Oooh, this one is bad too. Are you aware of the divorce rate? It’s lower than 50%, also a myth, but it’s up there.

The Reality

None of us should leave any important aspect of our life entirely in the hands of someone else. Even if your partner loves you and is trustworthy, people make mistakes which can leave them in over their heads.

If you are not communicating regularly about something as important as family finances, you may be in for some very nasty surprises. And leaving finances up to one partner is too much work, responsibility, and stress for one person. Things like that are meant to be shared in a relationship.

If one person is better at it or more interested in it, it’s okay to let them take the lead. But you need to have a look in at least once in awhile.

7. Cash Is King

It’s always better to pay cash for things rather than take out a loan or to put them on a credit card. Credit cards and loans are dangerous and will ruin your life.

The Reality

In some cases, you might be able to get a discount for using cash making it the better option. But using cash for most purchases will leave you with almost no recourse if something goes wrong.

Credit cards give all kinds of protections, extended warranties, fraud protection, additional insurance on things like travel. And if your card is stolen, cancel it and let the company sort if out. If your wallet full of cash is stolen, you’re out of luck.

how to use a credit card

How To Use a Credit Card

Abusing credit cards can ruin your life but paying cash for a diamond ring that turns out to be a fake is pretty bad too.

8. A Savings Account Is A Good Place For Your Emergency Fund

It is if you don’t like making money. And in fact, prefer to lose money. Because the best interest rate on a savings account I could find is a measly 1.05%. You’ll lose money if you keep your emergency fund in a savings account because average inflation is about 3%.

The Reality

If you need that money in five years or less, go ahead and leave it in savings. If you’re saving it for a big purchase like a home. But that’s not what an emergency fund is for. You shouldn’t need to access that money very often. So you want it to work for you.

Putting that money into something like Betterment will net you a return of around 7% on average over time. Much better than any savings account.

9. Two Incomes Are Better Than One

Well, of course, it is. Isn’t it? Bringing in more money is always better.

The Reality

Unless the money you’re bringing in is less than what is going out. This will mostly be an issue for those with children trying to decide if both parents should continue to work or if one should stay home.

Child care is expensive. Commuting is expensive. Lunches out are expensive. Having two incomes can also make you more careless with money. If you know you only have one income to depend on, it can make you a better saver and more frugal.

There are also considerations beyond money. There is a lot of debate about whether children are better off being raised entirely by a stay at home parent. I won’t wade into it. It’s a decision for each family. But money doesn’t always have to be the driving force behind financial decisions.

10. I Don’t Need An Emergency Fund. I Have Credit Cards.

As long as I have plenty of room on my cards, I don’t have to have an emergency fund. If I lose my job, it won’t take me long to find another.

The Reality

It takes an average of four months to find a new job. You can wrack up a lot of credit card interest in that amount of time. Could you pay your rent or mortgage with a credit card?

You can use a credit card for a one-time emergency like a major car repair, and while it might sting, it won’t cause the kind of damage putting every living expense on a credit card for a few months will do.

A good rule of thumb is to have an emergency fund that contains six months of living expenses. This takes away an enormous amount of day to day worry and is invaluable if the worst should happen, and you lose your job, and it takes some time to find another.

I’m sorry I wasn’t able to blow anything up Mythbusters style, but hopefully, I still managed to put some of these money myths to bed.


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  • Having an emergency fund is really important especially when you have a kid. I love the number 7, now I’m thinking to get a credit card, I always pay all my purchases with cash.

    • Nick

      Just be careful to not EVER accumulate a balance! It’s not impossible for someone to simply pay off the balance every month, but it is very easy to slip and have to start paying evil interest rates.

  • Allison

    Good one, fight the myths!

    • Candice Elliott

      Thanks Allison!

  • Robert Wheater

    Nice Article! I especially like number 9. Currently my wife and I both work but we have always lived as if we only have one income, which is a good thing since she is currently pregnant and will be on maturnity leave shortly! I think you would enjoy some of my articles at CreativeBudgeting.com. Have a read if you have time and let me know what you think. Thanks!

  • Nice post. I appreciate #7 in particular. Some folks have trouble reigning in their spending and, for that type of situation, cash can help “feel the pain” of parting with money. When spending is under control, credit cards can help in a number of ways. In addition to what you’ve mentioned above, they also offer a play-by-play of spending patterns throughout the month, thanks to nifty little apps that show your spending totals by category as you go along.

  • You can always find at least a tiny bit to save if you automate savings and pay yourself first. Eventually you won’t even notice the money is missing!

  • Wes

    Number 8 is absolutely atrocious advice. An emergency fund is PRECISELY for money that you might need at a moment’s notice (e.g., at any moment in the next five years). It doesn’t matter how “often” you need to access it; it only matters that you need to access it immediately when an emergency arises. Consider that perhaps the most common “emergency” – job loss – is correlated with recession and stock market decline. Imagine if your emergency fund was invested in Betterment (e.g., the stock market) in 2008 and then you got laid off. Suddenly your emergency fund has been cut in half – AT EXACTLY THE TIME YOU NEED IT MOST. The opportunity cost of lost return on your emergency fund shouldn’t be viewed as a loss; instead, it is an insurance premium of sorts that you pay to make sure you have cash when you need it.

    • Nick

      Very well put. I wonder what the allocation would be for someone who puts their emergency fund into betterment. Also I wonder what the lost would have been back in 2008 with said “emergency fund” allocation.

      • jb1907

        If your emergency fund is in cash, you would have lost nothing. The only advantage to having cash at the bank down the street and Betterment is access to cash immediately. I assume there is a money market option at Betterment.

    • Candice Elliott

      It’s not. We’ve mentioned the reasons for this several times. But not everyone is comfortable doing so, do what makes you comfortable. That is not necessarily the best thing for your money though.

  • N-O-N-E

    One I disagree with is #8. A savings account (separate from your normal flow of cash accounts) is ideal for an emergency fund.

    I think they are fundamentally erring in their description of an emergency fund. The whole purpose of an emergency fund is that you might (at any time – including tomorrow or the next day) need 3-6 months worth of minimal living expenses in case of an emergency (job loss, non-covered loss of income due to short-term disability/injury, unpaid family medical leave). So…why on earth would there be a 5 year + horizon on that?

    The money you are losing to inflation is your “payment” to insure yourself against the need to borrow money in a crisis.

    (I know others have said this… but this is really important!)

    • Nick

      Let’s not forget about a medical crisis! An expensive necessary procedure, money to get bailed out of jail, etc! While the last example may seem far fetched and silly, it is indeed an expensive emergency. An emergency fund is in fact for an emergency. Which means these are unexpected and unlikely events we are preparing for.

      • jb1907

        Nobody ever has to come up with $1,000 on the spot for an emergency surgery. There are very few necessary procedures that aren’t known in advance.

  • I agree with Wes
    Having emergency funds in the stock market makes no sense. The idea is to have the emergency funds safe and liquid at all times. The interest rate you may earn on these funds does not matter what matters most is that the funds are there when you need them. Can you imagine if you had your emergency fund invested in stocks when the market crashed in 2009. Some folks lost almost 30% of their investment total. Emergency funds should never be invested in stocks. Keep them in a savings account or money market account.

  • DP

    These are great. So many of these rules get twisted and turned so that they no longer accurately apply. I think some of these rules are great, as long as they are utilized in the proper context. Gold CAN be a good investment, but it depends on timing. Sometimes it IS better to stay in cash for a short time, but not consistently. These generalities must be taken with a grain of salt and understood more specifically before being blindly followed.


  • TheTruthHurts

    Creationism IS a thing, unless you can explain how matter exists without having a creator.