Many people face hurdles when it comes to saving money, especially right now. Recent inflation issues have had a big impact on how far each dollar can stretch in your budget, as we’re paying higher costs on everything from groceries to gas, housing and other expenses. In turn, you may be finding it more difficult than ever to put your extra money into savings.
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But economic turmoil likely isn’t the only thing that’s affecting your savings plans. There are often other factors at play, like mistruths or misunderstandings about money, that can also negatively impact your savings. And what’s worse is that you may not even realize that these money myths are damaging your financial health.
It’s important to get to the truth behind these inaccurate beliefs so you can more easily achieve your savings goals.
3 money myths that are hurting your savings
Here are three money myths that could be hurting your bottom line.
Myth: You need to make a lot of money to save
This is simply not true. You can save money no matter how much you earn. The key is to create a budget and stick to it while finding smart options for growing your savings. There are many ways to cut back on expenses, such as cooking at home more often, canceling unnecessary subscriptions and shopping around for better deals on insurance and other services.
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And, as you find ways to put more money into sayings, you can also help your money grow with tools like high-yield savings accounts (HYSA), which offer higher APYs than traditional savings accounts on the money in your savings. The average rate on a regular savings account was just 0.52% as of July 24, 2023. However, the interest rates offered by high-yield savings accounts are typically much higher.
There are numerous high-yield savings accounts with interest rates of 4.5% or higher right now, and taking advantage of these accounts can add up to big gains in your savings over time.
Myth: You need to invest in risky assets to get a good return
Market volatility can be great for your investment portfolio, but it can also eat away at the returns on your stocks or bonds. Luckily, there are many safe and low-risk investments that can help you grow your money over time. For example, you could invest in index funds, which track a basket of stocks or bonds. Index funds are a low-cost and diversified way to invest in the stock market.
Or, you could take advantage of the rates being offered on certificates of deposit (CDs) and other similar accounts. CDs offer low-risk opportunities to grow your money over time, and many come with higher-than-average APYs right now. In fact, there are numerous CD options with terms from six months to five years that offer between 4.50% and 5.50% APY on your money. That’s a great return on a low-risk investment.
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Myth: You need to start saving early to be successful
While it’s true that the earlier you start saving, the more time your money has to grow, the reality is that it’s never too late to start. Even if you’re only able to save a small amount each month, it will add up over time, especially if you take advantage of the opportunity to earn higher-than-average rates of interest on the money in your account.
Let’s say, for example, that you put away $2,000 right now into a high-yield savings account at 4.85%. In one year, you’ll have earned an extra $96.98 on the money in your account. As you add to that balance, the interest grows. Plus, the interest you earn compounds, which means that the interest you earn on both the money you deposit and the interest you earn will help your account balance significantly over time.
The bottom line
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There are plenty of money myths out there, and if you aren’t careful, these inaccurate beliefs could be holding back your savings — and your financial security. It’s important to understand the truth about your money so you can make informed financial decisions and find the right ways for your money to grow. By doing this, you’ll be better positioned to reach your short and long-term financial goals.
