5 common money myths to be aware of
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5 common money myths to be aware of

  • Highlights

  • Don’t invest in gold if you seek 100% security for the long term

  • Don’t wait till you cross 60 to buy life insurance

  • Transfer your PF between jobs rather than withdrawing the amount

  • Financial health depends on both salary and savings

To ensure that your savings grow year on year, it is essential that you are equipped with the right information, as this will manifest into financially sound decisions. As a result, it is crucial to identify fact from fiction. On the other hand, if you don’t take the effort to verify information, your growth may plateau, or worse still, you may end up losing money.

Take a look at 5 money myths that you shouldn’t believe to ensure good financial health.

1. Investing in gold is the best long-term investment

The value of gold is difficult to determine as its rates are not fixed. Additionally, several parameters such as the demand, supply, and global stock market conditions affect your investment in gold. You may consider investing in gold based on the fact that inflation will always be on the rise, which increases the value of scarce resources like gold. However, this metal can be volatile and can go through bearish periods as well, just like it did in from the mid-1980s to the early 2000s. So, while investing in gold can be part of your portfolio, ensure that you also invest in other long-term schemes such as PPF, fixed deposits and SIPs depending on your risk appetite.

2. Life insurance is for the elderly

Insurance protects you from any harm to your life, so there’s no reason to consider it only once you are a senior citizen. In fact, make the move to invest in a good life insurance policy as soon as possible. Not only will this curb out of pocket expenses should anything happen to you, but it will also protect your family and offer financial stability in the event of your death. In addition, the sooner you buy insurance, the better cover you are likely to get.

3 Common Myths about Fixed Deposits

3. It is best to withdraw your EPF when you’re in between jobs

You may consider withdrawing your Employee Provident Fund (EPF) amount when you quit your existing job, and before you join a new company. However, withdrawing this amount isn’t ideal, as it keeps you from saving for your retirement or other long-term goals. This is because when you withdraw the amount, you are more likely to spend it rather than save or invest it. So, instead of withdrawing, transfer your PF account to the next office. In this way, you can carry forward your PF amount all through your career and save a sizeable corpus by the time you retire.

4. Earning a monthly salary means that you are financially healthy

Someone with a salary of Rs.30,000 may be more financially stable than you, even if you earn Rs.1 lakh a month. This is possible because financial health doesn’t depend solely on what you earn, but it also takes into consideration what you do with your salary. How much you are able to save and invest determines your true financial health. To be healthy in this regard would mean investing regularly in a mix of high- and low-risk instruments. Also, habits like spending infrequently and following a budget also point towards good financial health.

5. Your spouse will inherit your assets if you don’t have a will

If you do not have a will, after your death, your assets will be taken care of by the state. In this regard laws may vary, but in all likelihood, your wealth will be distributed to your heirs. To ensure that the assets that you leave behind are bequeathed to the right people in the right proportion, it is important that you have a will. It helps avoid any disputes and ensures that the rightful parties inherit your wealth.

Instead of making assumptions, ensure that you read up on matters of finance and have the correct information guiding your financial decisions. It is best that you always double-check monetary information to verify its authenticity.

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