10 Sep 2020 • 3mins • Fonk

5 money myths you need to forget

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There’s plenty of money advice out there, but not all of it’s true. Here are five common money myths you might want to rethink…

1. ‘It’s better to buy a home than rent’

Owning your home is a dream for many of us, but that doesn’t mean it’s right for everyone.

There are plenty of situations where renting might leave you better off than having your own place. You won’t need to worry about unforeseen repairs or upkeep expenses, you’ll save on buildings insurance, stamp duty and the like – plus it’ll be much easier to up and relocate if you get a new job opportunity. It all depends on what’s right for you.

2. ‘Debit is always better than credit’

While you might use a debit card for everyday spending, a credit card can come in especially handy for big purchases, as long as you’re good for the money.

Credit cards purchases are generally better protected and can come with extra insurance against damage or theft. So for fridges, beds or TVs, credit can be a smart way to spend. Plus every time you pay off your balance you’ll be improving your credit score ­– just make sure you pay it off quickly as interest racks up fast.

3. ‘It’s always better to pay in cash’

Sure, paying in cash has its perks. Keeping an eye on what goes in and out of your wallet means you can’t go overdrawn for starters. That said, there’s also very little protection if something goes wrong.

Credit cards give you all kinds of extra security on your purchases, including in cases of fraud. Many banks even let you earn rewards as you spend, so you’re actually getting a little something back every time you use your card.

4. ‘I have an overdraft so I don’t need a rainy day fund’

Overdrafts are great, but you shouldn’t rely on them too heavily. For most types of account, going into your overdraft will run up interest if you stay in the red for too long.

An overdraft can be a lifeline when cashflow is tight, but using one as a rainy day fund can be a dangerous habit, especially if you don’t have anything tucked away to top up the account.

5. ‘I don’t earn enough to save’

However tight your budget, most of us can still find small but meaningful ways to put a little aside each month.

Whether it’s spending swaps like switching your shop-bought coffee for a cup at the office, or using features like the Money Jar to help you round up the pennies, it all adds up.