Money Myths That Could Be Holding You Back

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Q: Our son has been getting into online investing and he and his friends try to outdo each other by seeing who can make the most money in a week. However, they’re walking dangerously close to the edge of making poor decisions in an effort to increase their gains. I overheard his friend mentioning that he needed to earn enough to pay his rent. We’ve always been conservative in our approach to managing our money, but our son isn’t interested in hearing our ideas and concerns. He’s admittedly doing well for himself right now, a feeling only enhanced by the fact that he has few financial obligations. Are there any big money myths we can share with him that will hopefully jolt him into thinking twice about the choices he’s making with his money? ~Kristina

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A: Online investing and trading can be exhilarating and risky, akin to a high-stakes game. Just like gambling, some individuals achieve remarkable success, while others face significant losses. Add in a little competition between friends and the incentive to take bigger risks only drives the stakes higher. There comes a point when gaming turns to gambling, and whether navigating the stock market or playing cards, it’s essential to predetermine your budget so that you don’t spend more than you can afford to lose.

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Long-term financial gains stem from making informed choices and managing your money wisely. While some seek bragging rights in the short term, it’s important to consider the bigger picture. As a parent, helping your son understand the consequences of his trading decisions can empower him to make sound financial choices. Here are five common money myths young adults should be aware of.

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Myth 1: It’s easy to get rich quickly

The majority of people do best when they view investing, trading, and money management as a marathon, not a sprint. Shy of winning the lottery or inheriting a windfall, getting rich quickly usually involves either a significant outlay of cash, hard work, a lot of risk, or some combination of all three.

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Trading applications employ sophisticated algorithms and AI that can help you do well, but not at the expense of wise decision-making and diligent effort. If your goal is to get rich quickly, in the words of Vince Lombardi, the only place success comes before work is in the dictionary; steer clear of shortcuts that seem too good to be true. They have a tendency to help you part with your cash in ways that make others rich instead of you.

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Myth 2: Owning your home is better than renting

There’s no one-size-fits-all answer when it comes to deciding if you should own or rent. Owning helps build equity in an investment. It gives you freedom of choice in how to use your home, or even if you’d like to renovate. And it offers stability. However, when you own, you’re responsible for all of the property taxes, maintenance, and repairs. Conversely, renting offers flexibility, less hassle with repairs, and predictable expenses, but you don’t build equity in your home and you are at the mercy of your landlord’s decision should they choose to sell.

Both options provide you with a place to live but they come with different trade-offs. Consider your lifestyle, financial situation, and long-term goals when deciding whether to buy or rent. Resist mindlessly buying into old-school thinking that might not be true in today’s economic climate. And if you find a place to rent that is less than what you’d pay for a mortgage, save the difference to build up equity of your own.

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Myth 3: Investing is only for the experts

You don’t need to be a pro working on Wall Street to do well at investing. If you want to learn about it and become proficient, start small. Set a budget and a goal if you plan to choose your own investments and track your progress carefully. Immerse yourself in reputable Canadian books, blogs, and podcasts and gradually build your knowledge. Avoid learning to trade with money you can’t afford to lose and set up a separate account for your gains if you plan to reinvest them. That way you’ll know exactly how much money you have as you strive to turn your hobby into an income stream.

Learn the Basics of How to Invest Your Money

Myth 4: Getting help with debt harms your credit rating

If you’re struggling to get by with your bills and obligations, you might be worried about asking for help because it could affect your credit rating. However, if you’ve missed any payments or been late a few times, your credit rating has already been impacted. Seeking help to get back on track will improve your credit rating in the long run, and the debt relief option you choose will determine the timeline for restoring your credit rating.

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Dealing with debt can feel like a daunting task and there’s unfortunately no quick or easy fix. Resist choosing a solution based strictly on your desire to rebuild your credit rating. Ultimately, your best solution will be a realistic plan to retire what you owe and address the underlying cause of your debt problem to ensure long-term financial stability.

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Myth 5: Get a good job and you’ll be set for life

There’s an adage that with good employment you’ll be set financially. However, there’s more to saving and financial security than just your income. Saving is about discipline and using a budget as a tool to help you achieve your goals. It’s about setting money aside in an emergency fund to help you get by should your primary source of income be jeopardized. Saving is one piece of financial stability, but it is equally important to make intentional spending and lifestyle choices. Working hard at a good job will ensure that you receive a solid paycheque, but what you do with it will determine whether you’re set for life or not.

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Do You Think of Savings as an Important Expense?

The bottom line on money myths that could be doing you more harm than good

While no investment is entirely risk-free, the one you make to enhance your level of financial literacy comes remarkably close. Whether you’re struggling with debt, need to nail down a better budget, or want to improve your money skills, the time and effort you spend investing in your long-term financial stability will pay dividends for years to come.

Related reading:

5 Steps to Take in Preparation for Retirement

How to Deal With Debt in Your Twenties

Tips to Stay Motivated When Paying Off Debt

Peta Wales is President and CEO of the Credit Counselling Society, a non-profit organization. For more information about managing your money or debt, contact Peta by email, check nomoredebts.org or call 1-888-527-8999.  

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