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8 common money managements myths you should stay clear of

Written by - Akshatha Sajumon

March 2, 2022 9 minutes


As soon as we start earning, the very first thing on our mind is spending on something that we have long wanted and finally having the means for it. Most people start earning in their 20s and it the time to be carefree and also splurge to some extent. At this time, they get a lot of advice from their parents and peers regarding managing their money for the short term and long term. This includes many myths that were ok for the older generation but things have changed drastically and what was ok for our parents may no longer hold true.

Here are the top money management myths that we often hear and that should be avoided at all costs. 

Top money management myths

When we talk about money management, this concept is quite wide and can be a composition of so many aspects like saving enough, investing correctly, planning for your goals, budgeting, etc. It is basically planning the allocation and utilization of your money in the best and the most efficient manner. Given below are the top money management myths that some of us still think to be true. 

  1. No need for retirement planning till you are 40

One of the most common myths often heard by many is that one doesn’t need to plan for retirement till one is in their 40s. Many think that when they are younger, they need to prioritize other needs and retirement planning can wait. This is one of the worst mistakes done by any person. To build a nest egg for retirement, time is crucial. One has to allow their retirement fund to build over decades so they have sufficient funds in their retirement to cover all their needs and do not have to be dependent on anyone. 

When a person starts retirement planning in their 40s, they have to take out a huge chunk of their money and push it towards a retirement fund. With the existing commitments often at the peak in the 40s, it becomes rather difficult resulting in a meager retirement fund that may not be sufficient to meet all the needs in retirement. On the other hand, when allocation towards retirement funds is started as early as in the 20s when there are fewer responsibilities, the amount contributed can be higher and the benefit of compounding of these funds will also be greater. 

  1. You need to be rich for investing

Another interesting thing often heard is that you have to be really rich to invest your money and for most only saving is enough. Saving and investing are two sides of the same coin. Simply saving and keeping the money in the savings account is quite silly as it will pay interest of hardly 3% and that too in very few banks.

The same money can be invested in good quality mutual funds or other dynamic investment options like aggressive hybrid funds, ETFs, index funds, etc. Investment in these products can be started through SIPs with funds as low as Rs. 100 or Rs. 500 depending on the investor. The potential returns generated from these investment options can help in better wealth creation and building a nest egg or emergency funds that can come in handy in time of need.

  1. Investment in gold is the safest form of investment

India is one of the prime gold markets in the world and gold is even today considered to be one of the safest investment options. Many would have heard their parents say that they should buy gold instead of investing in stock markets as the former will never fail. While it is true that stock markets are quite volatile, the returns from investing in gold are not that promising.

Gold can definitely not provide a regular source of income and add to it factors like storage, conversion costs, safety and security of investment, etc. and for young investors, the investment just does not become too lucrative. In today’s market, there are better investment options if one wants to invest in gold like Gold ETFs, Sovereign Gold Bonds, etc. These options will help in generating higher income at the same time avoid the perils of investing in physical gold. 

  1. A credit card is sufficient as emergency fund

Having a credit card today is a necessity but it does not discount the need for having an emergency fund. An emergency fund is a fund that can help you tide over for at least 6 to 9 months in time of crises like loss of job, immediate medical expenses, etc. Credit cards can be used for daily expenses to build your creditworthiness. 

However, relying on credit cards in times of financial emergency can potentially land one in a debt trap, and coming out of one is quite difficult. Hence, it is crucial to understand that credit cards are important but cannot act as a safety net in times of crisis. For such times, having an emergency fund is crucial. 

  1. Life insurance is not needed when you are in your 20s

Many think that life insurance is needed only after they have higher responsibilities like family, dependent parents, etc. In reality, every person should have term insurance as life is unpredictable. At the later stage of life, buying life insurance can be an expensive affair. It is common knowledge that the premium costs increase when it is bought at a later stage of life. Hence, it is advisable to buy term insurance as soon as possible to gain maximum coverage at reduced premium costs.

  1. Investment in FDs and PFs is enough

Even today the ideal investment option for the older generation are bank FDs and PFs. Although investment in these options provides security and risk-free returns, they are not sufficient for wealth creation. Today interest paid on bank FDs and PFs is between 2.5% to 5.5% and 8.5% respectively. 

However, in dynamic investment options like mutual funds, particularly equity mutual funds, the potential returns are much higher. Therefore, investors have to ensure that their portfolio is a healthy mix of low-risk or risk-free investments as well as investments that have the potential to generate higher returns that can help them achieve their financial goals faster.

  1. Buying a house is always better than renting

Owning a home is a dream that every person has and is also associated with a milestone or a financial goal. However, the reality is that in today’s world, owning a home is quite difficult given its cost and maintenance. Also, most individuals at the start of their career would not want to put down roots and rather go where their career and opportunities take them. At such a time owning a house makes little sense and paying rent rather than EMIs is more feasible. Having your own personal space is quite essential but with the changing dynamics of the world, it can often be associated with being overrated or a thing of the past   

  1. No need to save or invest as the spouse does it 

This is one of the most dangerous money myth that is not only found in our country but across the world, especially with women. Most women think that since their spouses are earning and doing their personal financial management, they should not worry about it. In reality, every individual should be financially independent and take care of their own investments. It is impossible to predict the future and leaving your financial security in others’ hands can be quite risky even if they are your spouse. In many cases especially in Indian families, it is quite normal for one person to be the sole earning member. However, every person in the family has to be aware of all the family investments and finances.   


Money management is essential for every individual and requires them to apply various techniques to get the best investments that help in achieving their financial goals. It is true that one should start investing and taking care of their finances at the earliest but it is never too late. Therefore, if there have been errors in money management, the important thing is to begin afresh and rectify those mistakes.


1. Is it true that money management should be left to professionals?

 No. It is a myth that money management should be left to professionals. It can be easily managed by individuals with a basic knowledge of investment options and their target financial goals.

2. Are credit cards a good option against loans?

No. Credit cards are good only for managing day to day expenses and building a credit history. However, the interest charged on credit cards is quite high and loans are definitely a better option to fulfill the need for financial assistance for long-term purposes like buying a car, home, funds for business, etc.

3.  What is the prime benefit of getting life insurance at the earliest?

The prime benefit of getting life insurance at the earliest is getting higher coverage at a lower premium cost.

4. What are some of the myths related to investment in stock markets?

Some of the common myths related to investment in stock markets are,
a) Investing in stock markets is meant for the rich only as it is too volatile.
b) If a stock or security has performed better in past, it will perform in the future as well.
c) Making profits in the stock market is all about timing the market correctly whereas, in reality, it is next to impossible to time the market. Even the experts agree to this.
d)Stock markets mean investment in stocks only.

5. When is the right time to start retirement planning?

There is no correct or fixed time to start retirement planning. The most ideal scenario is to start retirement planning at the earliest, preferably from the time one starts earning.

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