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Highlights
- It is April 1, and you want to be on the lookout for anything that could be an April Fool’s joke.
- A lack of financial education can make one believe in financial myths and making wise financial decisions is no joking matter.
- Some financial myths are- credit card balance is good for credit score, a fixed mortgage rate is the best, health insurance is for unhealthy people, student loans should be paid off early, pulling out money from stocks in bad times is good.
William Shakespeare said- “April hath put a spirit of youth in everything.” With a new month just in, the international day for playful pranks, jokes and laughter are here- April Fool’s Day.
While it is not really a holiday, people plan for days in advance on how they can prank their friends and family on April 1, all in jest. And why not? It is one of the days when they can get away with almost anything.
In the ever-evolving field of finance, one often gets “financial advice”, which when vigilantly assessed are “financial myths” and quite fit to be April Fool’s Day jokes. So, here are five financial myths that should be amongst this year’s April Fool’s Day jokes!
MYTH #1- Credit card balance is good for credit score.
This is a classic financial myth. Many people believe that having a credit card balance would help them increase their credit score. However, in reality, making on-time payments help to create a positive credit history. So, having a credit card balance might hurt your financial stability by costing you unnecessary interest and reducing credit score by increasing credit utilisation.
MYTH #2-A fixed mortgage rate is always the best.
This is another famous financial myth. People believe that a fixed mortgage would ways be beneficial to them. However, there are various mortgage plans, and one should opt for a plan according to their needs. For instance, if someone plans to move before the rate is up, they should go for an adjustable mortgage rate, which can help save money every month.
MYTH #3-Health insurance is only for unhealthy people.
But is it? This is a common myth that people pull off quite often! “Why do you need health insurance? You are healthy and fit”. Well, health insurance is for everyone. Its core idea is to provide better financial stability and assist one in medical emergencies, as and when they may arise.
MYTH #4-Prioritise paying student loans early.
Wait. What is the hurry? Another classic financial myth! People tend to believe that paying student loans as early as possible would give them financial freedom. However, student loans are mostly considered “good debts” because of their low-interest rates. Thus, one can use that money on investment to yield higher interest rates.
MYTH #5-Pulling out money from stocks in bad times is good.
This is perhaps one of the most common mistakes that people make. When the market goes down, many people get frightened and sell their stocks. However, if the portfolio is diversified, most value is recovered within two to seven years (the 1929 crash is a classic example of this!). Besides, when the market goes down, one should consider buying more stocks instead of selling them at a loss.
So, pull these financial myths this April Fool’s Day, but ensure to disclose the actual truth at the end of the prank. We are in 2022 now, and it is time to get rid of these financial myths and use them solely for April Fool’s Day.
