12 money myths to avoid being haunted by this Halloween

It’s that time of year again – and, while Halloween superstitions and myths are viewed as a bit of fun, other prevalent myths can have scary consequences. Here are the top money myths to avoid!

Much like those adorable fancy-dress ghosts who’ll no doubt appear on your doorstep this weekend, there are many money myths floating around.

However, the latter can be far more frightening, as they lead to misinformation and make it difficult to tell a trick from a treat when it comes to managing your finances. What’s more, believing a myth and therefore making the wrong move might haunt you for many years to come.

To help avoid being financially spooked, we’ve busted 12 common misconceptions about money, including debunking myths about taking financial advice.

Money myths 

Myth 1: It’s too early to plan my retirement

While it’s understandable that retirement might not be at the front of your mind when you’re in your 20s and 30s – with your career, travel and first home often taking priority – it’s important to be mindful of your long-term financial goals too.

Saving as early as possible (for example, investing in a pension) can help you to reap rewards later on – as the earlier you start, the more time and potential your retirement pot will have to grow. Any returns will also benefit from compound interest, which is often compared to a ‘snowball effect’: once your savings pot is ‘rolling’, it gathers momentum, collects more and grows in size.

Myth 2: Investing in stocks is too risky

We humans are hardwired for safety. While this instinct was crucial for our ancestors, being too conservative with your finances could lead you to miss out on opportunities that could grow your wealth. Of course, the stock market is not without risk – but if you do your research and stick to your risk profile, investing will seem much less intimidating.

This is also where financial advice comes into its own – providing guidance, investment solutions and ongoing service to help you achieve the right investment strategy for you and your goals. What’s more, here at Wellesley, the suitability of our advice is guaranteed.*

Myth 3: Cash is the safer option

Another reason you might be reluctant to invest in stocks or shares is because you might believe that cash is a risk-free asset. But, while it won’t suddenly drop in value like a share can, cash is not risk-free – as inflation will reduce its spending power over time.

This might ring a bell if you’ve found yourself stuck in a rut with a bank account that pays zero interest on savings. While it’s prudent to have a ‘rainy day’ cash fund, remember that cash is only part of the picture.

Myth 4: I have savings, so I don’t need income protection

Forget black cats – in finance, it’s the black swan you need to look out for! A black swan event is an occurrence that’s rare and devastating in its impact, and seemingly emerges from nowhere – but with an element of retrospective predictability.

The COVID-19 pandemic is one such event, and one that sadly highlights that, in many cases, safety nets have been found wanting. While most of us have some form of insurance in place (e.g. for homes, holidays or pets), many people don’t insure against the loss of the most important things of all: life and income.

Again, while having an emergency cash fund is sensible, insurance policies that help you and your family meet your financial commitments – in the event of a death, illness or accident – are vital. Such policies include critical illness cover, life insurance, income protection and mortgage protection.

Myth 5: I need to earn more

While it stands to reason that having a higher income will positively impact your ability to build wealth, it’s not the only factor at play. How you manage your money is crucial, as it dictates how you spend, save and – as discussed above – protect your wealth. Remember, if you spend as much as you earn, your salary is near-irrelevant!

Myth 6: I’m ‘bad’ with money

How often do you (or indeed, your friends) say “I’m not good with money”? While that phrase might roll off our tongues without much thought, saying the words can actually take a real toll on our subconscious – impacting our financial confidence, and therefore our ability to plan effectively for the future. It’s important to empower yourself, so that next time you talk to your friends, it’s a positive conversation. Talking of which…

Myth 7: It’s rude to discuss money with others

Of course, saying “I’m not good with money” could also be a way to avoid talking about it in the first place. Money is a taboo subject for many people – and, while it’s not deemed socially acceptable to brag about your salary or expensive purchases, a candid chat about money with your inner circle can be a real positive.

You may find it easier to talk to someone who’s one step removed from you personally, like a financial adviser. Indeed, people often find that their adviser comes to feel like a member of the family, sitting around the kitchen table as a trusted source of personalised information who knows their situation well and guides them on key decisions.

Whoever you decide to talk to, the key thing is to get talking!

Myth 8: Tax ‘shelters’ are illegal

This a common misconception – the term is easily confused with tax evasion (which is illegal, and often hits the headlines). However, tax-efficient shelters and allowances are legal and very much encouraged by financial advisers! ISAs and pensions are commonly referred to as tax shelters (or wrappers – i.e. a product that can be wrapped around your savings to shelter them from tax).

From maximising your ISA allowance to using your Inheritance Tax (IHT) gifting exemption, you should be doing everything you can to mitigate the impact of tax and capitalise on tax relief, as these small steps may make a real difference to the financial security of you and your family. Discover the rules and allowances for the 2021/22 tax year here.

Myth 9: Money can’t buy me happiness

While the overall sentiment is true – money can’t really buy you happiness, love or health – it’s important to be mindful of the link between money and our overall well-being.

Financial security can be an important factor in promoting mental health. Money is a daily concern for 16% of adults in the UK, with nearly half the adult population saying they had worried about money once a week or more in the previous month.1 What’s more, in a recent survey, 47% of women and 43% of men say wealth, to them, means ‘health and happiness’.2

So, while it may be true that money can’t directly buy you happiness, it’s clear that financial stability will certainly help bring you that all-important peace of mind!

Myths about financial advice

Myth 10: Financial advice is only for rich people

The idea that financial planning is the preserve of wealthy individuals is a myth we want to banish along with any Halloween ghouls. We believe financial advice is something that everyone can benefit from, as it’s about taking the best possible care of your financial needs and those of your family, giving you security for the future.

Indeed, an adviser can help to remove some of the mental load that comes with things such as planning for retirement, meeting tax deadlines, keeping on top of changing pension rules or optimising your investment performance – as well as calming any nerves that arise from global events, such as Brexit and, of course, the pandemic.

Myth 11: It’s cheaper to invest without advice

Although you wouldn’t have to pay an advice charge if you were to invest without receiving advice, you’re far more likely to purchase products that may be unsuitable for your needs, or potentially invest in asset classes that don’t match your attitude to risk or investment time horizon. By receiving advice, this can help you make better decisions that are tailored to you as an individual.

When investing independently, you need to ask yourself these questions:

  • Can you afford to lose money?
  • Do you have the time and patience to do the research yourself?
  • Do you have the experience, knowledge and skills required to be a successful investor?
  • If things go wrong, are you comfortable taking sole responsibility for poor investment decisions?

If the answer to any of the above questions is ‘no’, seeking advice will be your best option.

Myth 12: A financial adviser will just try and sell me a product

In the past, advisers received commission for products they sold, but this is no longer the case. Since 2012, financial advisers dealing with savings and investments do not receive commission and must charge clients with transparent fees.

In fact, the financial benefits of taking advice have been well documented, and research from the International Longevity Centre UK (ILC) showed that those who took advice were, on average, £47,706 better off in retirement (in pensions and financial assets) than those who didn’t.3

Here at Wellesley, our fees are fully explained and made clear from the outset, and you are under no obligation. We therefore have no incentive to get clients to take any course of action, and in some cases our advice may be to do nothing.

Myth-busting with Wellesley

As we’ve seen, believing a money myth can be a costly affair. So, this Halloween, it’s time to banish those ghoulish delusions, blow the cobwebs off our long-term plans, and fight your demons when it comes to financial confidence.

At Wellesley, our team of ghost – sorry – myth-busters are with you every step of the way! Contact us today on 01444 244551.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested. An investment in equities does not provide the security of capital associated with a deposit account with a bank or building society.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

*St. James’s Place guarantees the suitability of the advice given by members of the St. James’s Place Partnership when recommending any of the wealth management products and services available from companies in the Group, more details of which are set out on the Group’s website at www.sjp.co.uk/products

Sources:

1 Money and Pensions Service, ‘Shame, upbringing and burdening others: why 29m UK adults don’t feel comfortable talking about money despite being worried about it’, November 2020. Sample size: 5,200 UK adults
2 WealthiHer Network, ‘The Changing Faces of Women’s Wealth’ report, January 2021, total number surveyed: 2,239
3 ILC, ‘What it’s worth – Revisiting the value of financial advice’, November 2019, based on receiving professional financial advice between 2001 and 2006 resulted in a boost to wealth (in pensions and financial assets) of £47,706 in 2014/16.

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