Money lies we tell our kids

We don’t mean to, but parents can inadvertently pass along financial biases and reinforce widespread money myths. Here are some of the most common.

The best place for money is in the bank. (See also: Investing is too risky.)With current interest rates paying a measly fraction of a percent on most deposits, and account holders getting dinged with service charges — that trusty bank account can quickly become a losing proposition. In the same vein, while some investments involve risk, others don’t. The more important factor is time : if you’re holding an investment for decades, you can usually tolerate some market losses and still come out ahead.

Credit cards are evil. When used appropriately — paying off the balance each month — credit cards can be a great tool for tracking your spending and earning rewards. It’s credit card debt that’s evil, and should be avoided like the plague.

Always buy on sale. While it’s a good idea to wait for a sale to buy something you’ve had your eye on, the more important part is to budget and save up for the things you need or want. If those items happen to go on sale, great — you’ve now spent less than you thought you would. But, as I wished I would have learned sooner, a sale actually costs you money if you end up purchasing something you wouldn’t have otherwise bought. 

Taxes are unfair. We’ve all grumbled about taxes — whether sales taxes at the cash register or when filing our income taxes. But that’s the price we pay to live in a civilized society, with public healthcare, schools and many other services. And while nobody should pay more than is necessary — you want to be sure to claim all the deductions allowed — taxes are really only unfair when some don’t pay their share.

Never rent. In the case where a house or condo is unaffordable, renting is the smart alternative. Overspending on a home is a huge risk; if faced with a job loss, it is much harder to relocate for work or downsize – not to mention that an increase in interest rates can make monthly payments unmanageable. The key is to invest whatever savings you gain from not having to pay property taxes, maintenance and repairs – and invest for the long term. But don’t just take my word for it; there are many online calculators that can help you crunch the numbers on renting vs. owning.

University is a prerequisite for success. (See also: You need a high-paying job to be happy.) As I wrote here, we aren’t doing our kids any favours by limiting their futures to one path. There are many roads to success, and they don’t all include taking on massive amounts of debt to get a degree. Furthermore, studies show that income has little bearing on happiness.

When we win the lottery. While parents might use this as a funny retort when kids ask questions like, “When are we going to have a big house like Johnny’s?” — make sure they get the joke. Take time to explain that playing the lottery is entertainment, not a financial strategy.

Keep the conversation going

Did your parents tell you any of these (or other) money myths? How old were you when you figured out the truth? Post a comment below.

Disclaimer

The views and opinions expressed in this article are those of the author and do not necessarily reflect that of CPA Canada.

About the Author

Tamar Satov

Managing Editor, CPA magazine
Tamar is a journalist specializing in business, parenting and personal finance. She blogs regularly in this space with advice and anecdotes on her efforts to raise a money-smart kid.