Debunking Money Myths

Interactive Video

[A woman sitting on the couch writing in a journal. Her laptop is on the coffee table in front of her.]

[Five speech bubbles with the following statements:

• It’s normal to have a lot of debt.
• Money problems are private.
• You don’t need an emergency fund when you have credit cards.
• Earning a lot of money makes you wealthy.
• Paying for everything with cash is the smartest way to go.]

Narrator: Do you think these statements are myths or facts? Make a mental guess and then select each speech bubble to learn more.

[Text: It’s normal to have a lot of debt. Picture of a woman looking frustrated with a thought bubble containing a large pile of credit cards and bills and a hand reaching out of the pile.]

It’s a myth. Jeanie believed that debt was just part of being a consumer. Now she’s paying hundreds of dollars a month in credit card interest. Her cards are maxed out; even though she’s no longer spending on them, and her debt keeps growing.

[Text: Money problems are private. Picture of a man looking puzzled with a thought bubble containing a credit report.]

Another myth. Dominic didn’t think much about it when he didn’t make payments for a couple months on his credit card. He wanted to game with his buddies, so he needed the cash to get the newest video game console when it came out. It’s no one’s business anyway. It’s a loan; he’ll pay it back. But his entire credit history is available on his credit report, which is not private or protected. Potential landlords, lenders, and even employers can access information about his poor payment history.

[Text: You don't need an emergency fund when you have credit cards. Picture of a woman looking outraged with a thought bubble containing a credit card with a percentage arrow pointing up and a piggy bank with a percentage arrow pointing down.]

Yep, it’s a myth. Graziela spent every dollar she made, choosing to go out with friends over saving money. When she got laid off from her job, she had to rely on credit cards to buy groceries and pay bills. Now she’s paying a high rate of interest on her rising balance instead of using her own money from savings, where she was earning interest.

[Text: Earning a lot of money makes you wealthy. Picture of a young couple looking baffled with a thought bubble containing hands holding cash.]

You guessed it—myth! For Alex and Pat, getting promotions and making more money meant more money to spend. Their lifestyle inflation prevented them from building wealth. Excessive spending wasted money that could have gone to savings and investments.

[Text: Paying for everything with cash is the smartest way to go. Picture of a young man looking frustrated with a thought bubble containing an apartment with a “no” symbol over it.] 

Myth! Charlie’s parents taught him to use only cash, so he never applied for any credit. Now he’s a young adult ready to move into his first apartment. But without an established credit history, the landlord isn’t able to see how responsible he’s been. Charlie can’t get accepted as a tenant, even though he can afford the rent.

[A collage of four images: A couple paying with cash at a register, a woman playing guitar on the street with an open guitar case holding a few dollars and some coins, a woman getting money out of an ATM machine, and a woman inside a bank standing at the counter talking with the bank teller.]

Everyone’s experience with money is unique. So don’t assume everything that you’re told about money is true. [The text appears: Don’t assume everything that you’re told about money is true.]

[A man walking, starting just behind the words “money myths” and moving toward the words “poor decision”.

Money myths can potentially lead you toward some poor decisions. [The text “money myths” moves across the screen with arrows appearing behind it. “Money myths” changes to the words “poor decisions.”]

[Picture of a woman looking at a computer and working in a notebook.]

Do your own research and make up your own mind.

[Seven cards with dollar signs and the following statements are on screen with the directions, “Select the money statements that interest you”:

• Buying a home is always better than renting. 
• You need to have a lot of money to invest.
• It’s too early–or too late–to start saving for retirement. 
• Credit cards are too risky to use - avoid credit card debt. 
• Bankruptcy wipes your financial slate clean.
• It's impossible to get out of debt.
• Paying in cash is best.]

Check out some of these money statements. Select the ones that interest you.

[After selecting “Buying a home is always better than renting,” a house with a “sold” sign in front of it appears.]

Owning a home can be a great long-term investment. [The words “long-term investment” appear below the image with the phrase “long-term” bolded.] Emphasis is long-term, because there are a lot of expenses associated with buying a house. [Dollar signs appear connected to the image.] And going through the mortgage loan process can be time-consuming, and your finances need to be stable. So if things are changing soon for you, think twice before acting. Home ownership isn’t right for everyone. You need to look at what works best for you at this point in your life. [The text appears, “Look at what works best for you at this point in life.”] If home ownership is a personal goal, you can work toward it. 

[After selecting “You need to have a lot of money to invest,” a picture appears of a woman looking at a chart on her computer that shows her money in stocks.]

Investing is for everyone these days. Remember to save first, but then let your money work for you. Online trading platform apps such as RobinHood, Acorns, and Public.com allow you to purchase fractional shares at costs starting at $1. [Links to RobinHood, Acorns, and Public.com appear.] Many wealthy investors started small. Always read the fine print when investing; money returns are never guaranteed. [The text appears, “Always read the fine print when investing.]

[After selecting “It’s too early–or too late–to start saving for retirement,” a picture appears of a couple looking at papers and the computer together.]

The earlier you start saving and the more you contribute, the more compound interest can work for you over time. [A bar chart made of cash appears with an arrow following the upward slope of the chart. The text “compound interest” appears.] But don’t let that deter you if you’re starting later. You can contribute more money or choose less risky investments to safeguard your retirement funds for a shorter time. [A bar chart with fewer bars and a more shallow slope appears with an arrow following the slope with the words “less risky investments.”]

[After selecting “Credit cards are too risky to use - avoid credit card debt,” a picture appears of a woman looking at her credit card while holding a tablet.]

When used responsibly, credit cards can help you establish a credit history and increase your credit score. [A credit score chart appears with the needle moving from 665 to 738.] It’s best to have a plan for credit card usage: Set a personal limit on how much you will charge. It's best to charge only what you can afford and pay off the balance each month to avoid interest charges. [The text appears on screen as mentioned in the narration with credit cards as bullets: set a limit on how much you will charge, charge only what you can afford, pay off the balance each month.]

[After selecting “Bankruptcy wipes your financial slate clean,” a picture appears of a man looking shocked and overwhelmed while looking at his credit report.]

Bankruptcies are negative marks on your credit report for 7 to 10 years and can prevent you from getting new loans, mortgages, and some employment opportunities. [“7 to 10 years” appears under the credit report.] Do everything you can to avoid bankruptcy. [The word “bankruptcies” appears on screen with a gavel breaking a coin. A shape moves toward bankruptcies and veers around it.] Bankruptcy doesn’t wipe away debt. Your debt is usually restructured so you keep paying an amount you can handle, or you can have assets taken from you, such as vehicles, homes, and valuables. [A pile of cash appears on the screen with the word “debt.” The cash is split into two piles.]

[After selecting “It's impossible to get out of debt,” a picture appears of a woman sitting on the floor surrounded by bills while doing math on a calculator.]

It's possible to eliminate debt with time and effort. [The words “eliminate debt” appear on a notepad.] Talk to creditors, look at debt consolidation options, or debt counseling. Use a budget to create a game plan to pay down debt. [The text appears on screen in a bulleted list with icons depicting each as mentioned in the narration: eliminate debt, takes time, takes effort, talk to creditors, debt consolidation and counseling, use a budget.] And most important, be patient with yourself. [The text appears, “Be patient with yourself!”] It often takes time for debt to build up and it also takes time to pay it down. 

[After selecting “Paying in cash is best,” a picture appears of a man counting cash while working on a tablet.]

Using cash is a good strategy to avoid building up debt. However, it does have some downsides in today’s world. [A circle appears around the cash in the man’s hand.] You don’t have the convenience of online purchases. [An image appears of a mouse selecting a buy button with one click covered by a no symbol.] Credit makes that possible and provides an electronic trail and purchase protection. [A credit card moves across the screen with a trail showing behind it.] In addition, you won’t have a credit score without establishing any credit, which may be needed for employment and housing checks. [A credit score chart appears with the words “no credit score.”] Credit can also make your money "work for you" with some credit rewards or cash back incentive programs. [A credit card appears with pictures of a fork and knife, an airplane, a gasoline pump, a bag of groceries, and cash.]

[Picture of a megaphone.]

Here’s the moral to this money myth story: Don’t believe everything you hear. [The text appears, “Don’t believe everything you hear.”]

[Picture of a woman working on a notebook and computer and three gears spinning with dollar signs in the middle of them.]

Take time to educate yourself. Managing money gets easier as you learn.