Finances are notoriously tricky to master; unfortunately, this has led to many misunderstandings over the years. There are many financial myths out there that many people believe are common sense. Debunking these financial myths allows you to make better choices with your money.
A Savings Account is a Safe Place for Your Money
When you need to store large amounts of money or if you’re saving up for a financial goal, the most common thing to do is put your money in a savings account. These accounts involve minimal risk and are insured by the FDIC. However, this is not the safest place for your money due to inflation. As inflation rises, it decreases the purchasing power of your money.
Purchasing power is the number of goods or services you can purchase with your money. Inflation leads to higher prices and decreases your money’s purchasing power. As your money sits in a savings account, you may accumulate interest but inflation actually causes you to lose money. Instead, you should opt to safely invest your savings so they can grow and keep up with inflation.
Your Home is a Good Investment
Many people say that buying a home is an investment. However, this isn’t exactly true. An investment is defined as anything where you put in money in order to get some sort of income or profit. Buying a home doesn’t immediately offer you any income and the “profit” isn’t nearly worth it. People think they’ll make more money when they eventually sell and let their homes appreciate in value.
However, homes don’t appreciate significantly and you don’t end up getting as much money as you’d expect. Additionally, you will pour a lot of money into your home to keep up with maintenance, pay fees and taxes, and do renovations. You end up spending more than you ever get back. Instead of buying, you should rent instead. Renting a home offers much more flexibility than owning one. You also have fewer responsibilities and expenses.
You Need A Lot of Money to Invest
Investing is a great way to increase your money over time. However, many people don’t even consider investing because they don’t believe they have enough to invest. You don’t need a lot of money in order to begin investing. Thanks to compounding, you can make small investments now that will snowball over time. When you make the right investments, you can save money for your retirement, build up funds for financial goals, or simply save up enough money to provide you with more financial security.
Many of the financial myths people believe might be shocking to learn about since they’re so widely accepted. Now is the time to boost your financial education and learn what practices will actually benefit you. Learn about common money myths and make better decisions for yourself.
Did you enjoy this article? Here’s more to read: Why You Should Learn More About the Estate Planning Process
