20 Personal Finance Myths You Shouldn’t Buy Into

There’s so much personal finance advice out there that it can be hard to separate the good from the bad. To help make things easier, we gathered some of the most common money myths that financial experts wish would just die, and tell you what the truth really is.

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1. Buying a Home is Better Than Renting

While owning your own home can certainly be a good investment, it’s often better to rent when you’re young. This gives you the financial and practical freedom to chase your dreams first, find the perfect career and decide where and how you want to live your life.

Looking for a cheaper spot to settle down? Check out the top 20 cheapest cities to live in Canada.

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2. Investment is Only for the Rich

You don’t have to have lots of money to invest. Even a small amount of money invested wisely can bring huge rewards.

It's really one of the best ways to earn money while you sleep.

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3. Invest in Precious Metals

Precious metals such as gold aren’t the great investment they seem to be. Their prices tend to swing, and you could lose money very quickly.

Keep in mind, it's not about the size of your budget, it's how you use it. See 10 ways to make the most of a tight budget.

4. You Can Be Too Old to Invest in the Stock Market

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4. You Can Be Too Old to Invest in the Stock Market

You can invest in the stock market at any age. However, after retirement, you may need to invest more carefully to maintain a healthy cash flow.

With many retirees now returning to the workforce, here are the 20 best jobs for retirees.

5. A Low Credit Card Balance Will Improve Your Credit Score

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5. A Low Credit Card Balance Will Improve Your Credit Score

Having a credit card can help you get credit more easily, but the catch is that it should be paid in full, on time, every time. This will show that you’re financially responsible and will be able to pay your debts on time.

6. You Only Need to Make the Minimum Credit Card Payments

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6. You Only Need to Make the Minimum Credit Card Payments

When your credit card bill arrives, it can be tempting to only make the minimum payment and think you’re in the clear. However, the larger the payments you make, the less you’ll be paying in interest.

Plus, make sure you're not doing any of these dumb things to do with your money in your 30s.

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7. You Only Have One Credit Score

In Canada, there are two national credit bureaus. TransUnion and Equifax use different formulas to determine your credit rating, so when you need a credit report or your credit score, you need to check with both agencies.

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8. Cash is Always Better

If you can avoid the trap of overspending on your credit card and racking up huge bills, paying with plastic can have several benefits. You can get rewards on your card, for instance, and having a paid-up credit card can boost your credit rating.

Plus, don't miss our list of 13 common credit card pitfalls.

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9. Earning a Lot Makes You Rich

A high income doesn’t always equal wealth. It’s your liquid assets and investments that make you wealthy, so if you earn lots of money, you can only be considered rich if you save your money and invest it wisely rather than simply spending it.

10. Higher Education Levels Always Earn Higher Salaries

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10. Higher Education Levels Always Earn Higher Salaries

While those with a higher level of education usually earn more, this isn’t always the case. In some professions the difference between what someone with a degree and someone with a high school diploma earn is almost non-existent.

See 20 jobs in Canada that pay over $200K.

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11. Two Incomes Are Better Than One

Having two incomes in your household isn’t always better, because it can tempt you to spend more and save less. If you can get by with only one partner’s income, put the other partner’s income in some form of savings plan.

12. Your Emergency Fund Should Cover Three to Six Month’s Expenses

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12. Your Emergency Fund Should Cover Three to Six Month’s Expenses

If you lose your job, you need enough money in your emergency fund to cover your expenses for the length of time it will take to get another job. This can be much longer than three to six months, especially if you’re in a high-income job.

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13. You Have to Earn a Lot to Save

Even if you scrape by every month, you can still save. The secret is to put away some savings before you spend your salary on anything else.

Don't believe us? Here are 20 ways to save $1000 a month.

14. You Don’t Need to Save for Retirement Until You’re 40

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14. You Don’t Need to Save for Retirement Until You’re 40

The earlier you start saving for retirement, the bigger your nest egg will be once you reach retirement age. The longer you have funds in your retirement savings account, the more interest your money will earn.

15. You Can’t Save for Retirement After 50

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15. You Can’t Save for Retirement After 50

While it’s better to start saving for retirement as early as possible, it’s not too late to start saving in your 50s. You may have to postpone your retirement a little or find part-time work to supplement your savings but saving something is better than saving nothing at all.

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16. Expensive Equals Quality

Paying more doesn’t necessarily mean you’re getting better quality. Often the cheaper, generic version of something is just as good as the expensive brand-name version. The secret is to shop around.

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17. Tax Breaks Are Only for the Rich

It’s not only rich people with shrewd tax consultants who can get generous tax breaks. In Canada, some of the things that you can get tax refunds on include your first home, moving house, your children’s extramural lessons and activities, daycare and public transport passes.

18. You Don’t Need a Will Unless You’re Rich

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18. You Don’t Need a Will Unless You’re Rich

Everyone needs a will. If you die intestate – without leaving a will – in Canada, the provincial government decides who gets your assets. Usually, your legal spouse and children will get most of your estate but your common-law partner may be left out entirely and your assets may go to the government instead.

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19. People Who Look Rich, Are Rich

Don’t be fooled by your neighbour’s big house, expensive new car, frequent overseas holidays or other signs of wealth. Even the seemingly super wealthy may actually be deep in debt.

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20. Money Can’t Buy Happiness

Whoever first said that money can’t buy happiness, clearly never had to go without money. Several academic studies have shown that a lack of money led to more stress but that test subjects’ emotional well-being improved when their financial situation improved.