Guest Posting Throughout the course of their lives in America, many Americans have heard that saving is a smart idea. Your mother and your banker both tell you how important it is to be diligent in saving for retirement. The blueprint for American success includes this as an important part. This is nothing more than a myth of how life should be led Nick Sasaki. America does not encourage individuals to save their money. Instead, it encourages corporations to gain profit while keeping people in debt (maybe even beyond death) until they pass away. Let’s look at some common misconceptions regarding saving money. Then you can decide for yourself.
Myth # 1 – Save your money in order to get an education at college, a decent job and go on to work. Saving for college sounds smart on the surface. After all, a good career is a worthwhile goal. Why is it that college, which is considered an ideal in America, is so expensive? It seems to be getting even more expensive. Today, many students have to take out loans of several thousand dollar to pay for college. For higher paying careers (think of lawyer and doctor), you may need to borrow even further money or spend an additional year in college. A young graduate is often burdened with debts worth tens or even hundreds of thousands, and some are as high as $100,000. This can be before they receive their first salary. You should not think that saving up for college guarantees financial success. The result could be many years’ worth of financial instability (IF, you get a decent job in today’s competitive and tough environment).
Myth 2 – Open a savings at my bank so you can put money away for the future. Although the bank holds your money and pays you interest for it, the rate of returns is likely to be the worst of anywhere you could put your cash (aside from your mattress). Banks offer a 1%-2% interest rate on their savings accounts. The inflation rates historically have been between 3% and 5%, which means you aren’t even saving enough to keep up. This means that the money you save today is worth less when you pull it out. In addition, banks collect your savings and use them to generate a profit of anywhere from 5% up to 30%. You get your meager 1%. While your money is losing its value to inflation, they invest it and profit.
Myth No. 3 – “Get your credit card and you’ll save between 1% to 2%, or even frequent flyer mileage”. Although these little credit card offers may appear to be great ways to save, the amount of interest that you have paid on the purchases you make is much higher than the 1%-2% savings you get. Each time you buy something with a credit card, you do not save 1%. Instead you lose anywhere between 6% to 28% depending on the interest rates on your card. Even if your card is paid in full every month at the close of the month, there are still annual and transaction fees. If you’re able to pay the full balance of your card at the end each month, use cash instead and save money!