Tuesday, December 12, 2017

"You Don't Need An Emergency Fund" - And Other Myths Young Adults Fall For

urgent money
When you are growing up, you may have it drummed into you by your parents to save as much money as you can so that you have a cushion to land on should things go wrong in life. You need to be able to continue to pay your rent, groceries and utilities and you need to be able to live while you save up. Being smart financially is not always easy, especially when there are so many tempting ways to spend your cash. However, one piece of advice that parents give that is good to stick to, is to have an emergency fund.

Most young adults around you will tell you that you don’t need an emergency fund. It’s one of those financial myths that people get told and the reason it’s a myth, is because EVERYONE needs an emergency fund. If you were to find yourself off work because of an injury that changes your life, you would need to find and fund the best injury lawyer to ensure that you get the right compensation. You’d need an emergency fund to keep the bills paid while you recover, and you need that time to recover. The thing is, there are a lot of financial myths that young adults fall for every day, and bad financial advice is harmful – not helpful. It can really put you on the wrong foot if you are given advice that is simply incorrect, and you could be unwittingly led into financial disaster. So, what are the most common myths young adults are told about finances?

Always Leave A Balance On Your Credit Card

Nope, nope, nope. Most people believe that having a balance that is unused on your credit card can help your credit, but in reality, you should never carry a balance of any amount on your credit card. If you do, you pay interest, which means that the credit card companies are making a wedge off cash off of you. Clear the balance entirely every month and you avoid paying more than you have to.

Applying For A Loan Won’t Hurt Your Credit

In most cases, companies are now offering a soft search for credit applications. This means that when you apply for a loan or credit card, you can get an idea of whether you will be accepted without the footprint left on your credit file. The problem here is that any hard search could decrease your score, so this myth is definitely one that is only half true!

Stock Markets Are No Place For Your Cash

Mostly this myth comes from a lack of understanding of how the stock market works. Most people hear ‘stock market’ and also hear the word ‘crash’. Your cash isn’t safe in a lockbox in your house, but it wouldn’t stop you stashing it there for safekeeping before you go on holiday, would it? In the stock market, your money at least has some hope of keeping up with inflation, which isn’t something that will happen in that lockbox in the bedroom!

Credit Cards Are Evil

Usually this I something said by those who have mismanaged their cards and therefore been burnt by debt collectors and late fees. For people with a massive lack of impulse control, a credit card is likely going to be a very bad idea. But that’s not everyone, and you can’t buy into the myth that credit cards are bad just because your sister’s friend’s mother had a bad experience. As long as you are responsible with it, you can benefit from a credit card.

Stuff = Wealth

You could have purchased many things with loans or credit cards, but rather than looking wealthy, all you’re going to do is show the world how much debt you are in. Don’t forget that the more you purchase on your cards or with borrowed funds, the more you have to pay back. Your material possessions don’t equate to wealth, so don’t be fooled!

Money = Happy

Well, you never see an unhappy person speeding past on a jet ski, but that’s neither here nor there. Money, when managed well, can of course make you happy. But it can also be the cause of stress, depression and upset. The relationship between money and happiness is relative depending on the level of debt you have.

Being smart and not listening to myths is going to help you get by, so take everything you hear with a pinch of salt and make up your own mind.

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