Plenty of myths about saving money get passed around as fact. These falsehoods work against your financial interest by either pointing you to savings strategies that don’t work or spinning a narrative that says that only certain people can save. Stop buying into these myths now.
Myth 1: Only high earners can save money
Wrong. If you’re making a living wage, you could be saving, even if it’s just a little each month. It may feel insignificant, but it adds up over time and can provide you an important financial cushion. The problem with this myth is that it leads some to believe that they shouldn’t save until they make more money, but by delaying savings, they are turning away the huge advantage of compound interest. The myth also assumes that high earners automatically save money. But many don’t because they don’t live within their means. Oftentimes, big earners socialize with other big earners, so the temptation to live large looms at every turn. Travel first class, buy the luxury cars, purchase the bigger mansion, the list goes on. But the math is simple: if you spend more than you earn, you won’t have money left to save.
Myth 2: Only cheapskates can save money
You don’t need to deprive yourself to build up your savings. In fact, if you’re smart about it, this can actually lead to a better, fuller life. Instead of wasting money on ordering greasy take out every night, you can spend that money on delectable organic foods and cultivate your culinary skills. With time and practice you can become a great cook, whipping up hearty meals that beat the monotony and price of pizza delivery. Or maybe you convince your friends to occasionally skip pricey nights out on the town and forge a new tradition of hosting your besties at your home. There are so many ways to save money and live a fun, satisfying life.
Myth 3: Sales will save you big money
Many sales are marketing ploys aimed at simply getting you to spend your money. The sale might draw you into a store and lead you to purchase something you don’t even need and will likely lose interest in quickly. So instead of saving money, you’re actually wasting money on an undesirable purchase. That’s money spent that you could have kept.
Myth 4: You’ll save money later by buying expensive gas now
The myth goes like this: By feeding your car expensive gas now, you’ll save money in the long run because you’ll need fewer repairs and you’ll extend the life of your car. But according to Consumer Reports, most cars run fine on regular-grade (87 octane) fuel and premium-grade won’t improve performance. Only some cars require the pricier grade, so keep that in mind when you buy your next car.
Myth 5: It’s too late
When it comes to saving, time is your greatest asset. However, if your child is a few years from college or your retirement is just around the corner, you still have time to save. In the college scenario, you can reap financial benefits even if your child is one year away from college. According to FinAid.org, “32 states and the District of Columbia offer a state income tax deduction or tax credit for contributions to the state’s 529 college savings plan, with four states providing a tax deduction for contributions to any state’s 529 college savings plan. This is like getting a small discount on tuition, with the discount equal to your marginal tax rate.” Depending on your state, that could lead to a 3 percent to 10 percent discount, which is nothing to sneeze at. If you’re just a few years from retirement, you should save aggressively to tax-advantaged plans like 401(k)s and IRAs (and contribute to taxable brokerage accounts, depending on your shortfall), find other sources of income, cut your expenses and consider delaying your retirement.
Now that we’ve busted these savings myths, think about what simple next steps you can take to improve your savings game. It might be as easy as setting up an automatic transfer of money from your paycheck to a savings account. Or you may decide to make a lifestyle adjustment to push you farther along in your savings goals. Make a list of your next steps and then tackle them one at a time.
The materials on this blog are provided for informational purposes only and do not reflect the opinions of ChimpChange LLC or Central Bank of Kansas City, Member FDIC. Several of these blog posts may contain links to content on third party websites which are provided for your convenience, please note that linked sites may have a privacy and security policy different from our own, and we cannot attest to the accuracy of information. ChimpChange LLC and Central Bank of Kansas City do not guarantee nor expressly endorse any particular product, service or third party content.