5 Savings Myths That Are Costing You Money – and What’s Really True
Written by
Laura Bogart
Edited by
Kristen Mae
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Most likely, you grew up hearing some old wives’ tales, like cracking your knuckles causes arthritis, or if you cross your eyes, they’ll stay that way forever. Fortunately, as you aged, you realized that these old myths were, well, just myths. But old wives’ tales touch on every area of life — including personal finance and savings — and if you believe the wrong ones, they can haunt you into adulthood.
Though you’re no longer vulnerable to believing that gum stays in your stomach for seven years after you swallow it, you might have internalized some savings myths that could cost you money. GOBankingRates decided to go myth-busting by breaking down some of the more common savings and money-related old wives’ tales that could be draining your wallet.
1. A Penny Saved Is a Penny Earned
There’s little doubt you’ve heard this one before — and on the surface, it sounds right. If you spend that penny on frivolities, you don’t have it anymore. But putting it into your piggy bank can help you build a nice cushion of savings.
However, Melanie Musson, a finance expert at Quote.com, points out that saving that penny alone won’t really grow your wealth long term. To truly expand your wealth, you’ll need to start investing.
“Saving money is certainly important, but saving money won’t earn you money. Investing money is what will make you money,” she said. “The saying would be more accurate as, ‘A penny invested is a penny earned.'”
2. All Debt Is Bad
To hear some experts talk about debt, you’d believe that all forms of debt are created equal — equally awful, that is. While Musson readily acknowledges that some debt, like high-interest debt, is harmful, she challenges the notion that all debt is inherently destructive.
In some cases, certain forms of debt — when managed responsibly — can help you move forward on your financial journey.
“But when you take on debt for an appreciating asset or to earn money, your debt is beneficial,” she said. “Purchasing a house is generally considered a good reason to have debt. If you buy a car because it will allow you to hold a job, that’s good.”
3. Don’t Invest Until the Market Is in a Slump
Musson says another common money myth that can keep you from growing your savings is the idea that you must wait for the right time in the market to invest — typically when it’s down.
Instead, remember the old adage: “It’s not about timing the market; it’s about time in the market.” The longer you have your money in the market, the more likely you are to benefit from compound growth.
“You shouldn’t wait to invest. You should invest regularly,” she said. “By doing so, you’ll increase your chances of investing at the opportune time, plus you’ll grow your portfolio.”
Investing consistently helps you develop the habit of putting money in the market without reacting emotionally to upturns and downturns. Consistency can also help buffer you from the more volatile swings in the market.
4. Saving Money Means Deprivation
It’s not hard to figure out where many people learned that saving money means giving up even the smallest pleasures in life. For millennials who endured the media’s panic about how splurging on lattes and avocado toast spelled their economic downfall, the lesson hit hard.
Vivian Tu, founder of Your Rich BFF, wants people to unlearn this myth. It’s not only untrue, but it can lead to restrictive habits that compel people to break their budgets altogether. Tu encourages people to think of other ways to generate the income they need — like asking for a raise at work.
“Think about how hard it is to cut $10,000 worth of expenses out of your life. That’s hard. You’re giving up a lot of things that you really enjoy. How easy is it to ask for a $10,000 raise?” she said. “That is absolutely heard of — as in, it happens all the time, happens to so many people.”
Being a rock star at work — while having documentation to prove it to leadership — and asking for a yearly raise is a more effective way to bring in extra money than going without the small things that bring you joy.
5. If You Don’t Learn About Saving When You’re Young, You’re Doomed
If you’re fortunate, your family provided you with a financial education when you were young — even something as simple as explaining how credit works or why you should keep your emergency fund in a high-yield savings account.
However, many people aren’t so lucky. As they get older, financial terms and best practices that seem like common sense to others may feel difficult to grasp — and they may be convinced they’ll never learn. What is it they say about old dogs and new tricks?
Tu is quick to dispel this myth. She wants everyone to know it’s never too late to learn about finance and build smart savings strategies.
In her book “Rich AF,” Tu writes that it’s not your fault if you grew up without learning these lessons. “By making financial literacy feel inaccessible and confusing, we’ve been able to keep our working class working — and carrying all of us on their backs.”
Once you break through personal shame and stigma, you can start learning more about finance and savings. There are plenty of books, podcasts, social media channels and online publications to help you.
As Tu writes, “It’s never too late, so you’re going to learn now. And it’s going to work.”
Bottom Line
Just as you had to unlearn the notion that stepping on a crack would break your mother’s back, you’ll have to unlearn some of the money and savings myths that are holding you back. With a willingness to learn more, invest regularly and wisely, ask for a raise, and get smart about debt, you can build long-term success.
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