Money is tough to navigate at any age, but it’s easy to misconstrue things in your early adult years. One person asked an online personal finance forum for their funniest money misconceptions from early on in life. Here’s what they had to say.
Note: Some quotes in this piece have been lightly edited for grammar.
1: Not Quite How It Works
“I thought you only got charged interest on a credit card if you didn’t make the minimum payment,” a now wiser commenter said. They recall maxing out a credit card and only making the minimum payment to avoid interest fees. “I don’t know how I never realized.”
2: Take a Risk
One person believed for too long that risk is inherently bad and kept their savings in a checking account. “I lost about a decade of investment potential because I thought the stock market was a casino,” they said.
3: Opposite Meaning
“I think the word ‘risk’ is highly misleading in finance,” another person added, saying it’s more important than people might think. “For some reason, holding cash for a decade plus would not be considered a risky thing to do. But we know it is a foolish thing to do.”
4: Times Change
An older finance buff who graduated in the 80s says their biggest misconception was that financial wisdom would be eternal. When they graduated, interest rates were between 15% and 20%. “What made great financial sense then would be terrible advice to give in the 2020s,” given how relatively low the rates are now.
5: Matching Game
When a Canadian entered the workforce, they thought their employer’s 3% Registered Retirement Savings Plan (RRSP) match added 3% to what they deposited. The reality? It matched whatever their deposit was, up to 3% of their income.
6: Wishful Thinking
One person’s funniest financial misconception? “I thought I would be in a good place financially when I hit 30 years old,” they said. “Boy, I was wrong.” Several people agreed this one hit them where it hurts. “In university, I thought if I could make “X” income by 30, I’d be laughing. Silly me didn’t adjust for housing inflation.”
7: Evil Interest
When one person was in their teens, they thought credit cards automatically charged interest on any purchase and were bound to drive them into debt. “This misconception made me EXTREMELY reluctant ever to get a credit card. Until a little bit later when I learned that you’ll only get charged interest if you don’t pay your balance off in full.”
8: Small Savings
One person says they used to think their savings account paid good interest and that it’s what would make them rich. Once upon a time, that wasn’t a bad train of thought. “Early in life, my savings account was paying 8%,” another commenter responded.
9: Smarty Pants
Although it’s more career-related than finance, a now wiser employee says they thought the salary one earns directly correlates with how smart they are. “Now I realize your salary has pretty much nothing to do with that and has to do with how in-demand your skills are, market rate, the quality of employer, and the company’s financial health,” they said.
10: Dodging Taxes
A commenter recalls hearing from the adults they were surrounded by that “making more money can lose you money by being bumped into a larger tax bracket.” It impacted their early financial smarts, they said. “Of course, when I started making money, I learned how the brackets actually worked. But it’s crazy how many people don’t understand.”
11: Meager Millions
Retirement is a lot more expensive than it used to be. One person says their biggest misconception is that “once they had $1 million, they’d be all set to retire.” Another added that if they won $1 million tomorrow, they wouldn’t change anything about their lifestyle. “I would pay off the mortgage and invest the rest.”
12: Lawyer Problems
Even as a childless lawyer with a dual income, one attorney is house-poor and finds the stress of doing law almost not worth the income. “I believed if I became a lawyer, I would never face the money problems my parents faced,” they said. “The world has changed so much.”
13: Harsh Reality
A misconception one person had about finances when they started their career was “that $100k/year for a family was a lot of money.” Another says they learned that from their parents but got a harsh wake-up call. “Surprisingly enough, when we got to that, we still felt pretty broke and had to stick to a tight budget to make it work. It was a harsh reality to learn.”
14: Easy Street
One person figured that since rich people and business owners were always busy calculating their finances, “they must be miserable.” News flash: many are living blissfully.
15: From Master to McDonald’s
You’d think getting a master’s degree in science would earn you a decent chunk of money. But a science student met a manager at McDonald’s with a master’s in biology who painted a different story. They made decent enough money at McDonald’s compared to the biology options they encountered.
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