Personal finance can be a scary topic, in part due to the fact that there’s a ton of misinformation out there. Without common core personal finance education in schools, people are left to fend for themselves. Many end up getting advice from a range of different sources that give contradictory or even incorrect information.
These dynamics lead to a lot of bad outcomes, as far too many young adults don’t have access to reliable, accurate financial advice. As a result, they rack up credit card debt, take on loans they can’t afford to pay back, and ruin their credit scores.
Fizz is on a mission to change the way that young adults build credit and manage their personal finances. There’s too much misinformation keeping young adults from making smart financial decisions. With that, let’s take a look at some of the most harmful myths out there when it comes to building credit and bolstering your personal finances.
Myth: credit and credit cards will ruin your life
Credit and credit cards can screw things up for you - when used irresponsibly. Buying things you can’t afford or taking out loans that you can’t pay back can bury you under a mountain of debt. Plus, you also run the risk of hurting your credit score.
But the truth is that credit and credit cards can’t hurt you if you don’t let them. If you pay your bills in full and on time, credit can be free to use and can help you build your credit score. Plus, you can earn valuable rewards in the process - rewards that you wouldn’t earn by using your bank-issued debit card or cash. Paying with credit cards is also a good way of protecting yourself against fraudulent activity on your card.
Myth: you need to go into debt to build credit
Plenty of people think that you need to open a credit card and go into credit card debt in order to build credit. Lots of young adults end up carrying balances on their credit cards and paying lots of interest because they think it’s how you build credit.
In reality, you don’t need to go into debt at all to build credit. Carrying a balance can actually hurt your credit score. Having an open line of credit (like the one you get with Fizz) and paying it off in full and on time are the most important things you can do when it comes to building your score. Things like credit utilization factor into your score as well, but you definitely don’t need to go into debt to build credit.
Myth: you should only get a credit card from your own bank
Lots of young adults think that because they use a certain bank for their checking and savings accounts, they need to build credit with a card from that same bank. This leads people to open cards that don’t help them as much as others (like Fizz) could.
The truth is that when it comes to building credit with Fizz or a credit card, you should find the card that makes the most sense for you. There’s no benefit to opening a credit card with the bank you primarily use. You won’t necessarily have higher approval odds by sticking with your bank - and if you’re worried about getting a card in the first place, Fizz doesn’t check your credit at all during the signup process, so you don’t have to worry about being approved.
Myth: you should keep all your money in a savings account
Saving money is certainly a good thing. Lots of people make the decision to open up a savings account, add to it when they can, and take from it when needed. Investing can seem risky, and because investments aren’t as accessible as money sitting in a savings account, lots of young adults only use savings accounts and don’t invest their money as a way of saving.
The fact of the matter is that while having a savings account for emergencies and as a way of saving up for certain purchases is a smart idea, you won’t get very much return on money saved for the long run. Most savings accounts earn around 0.01% interest every year, which doesn’t even keep up with inflation. If you have money that you plan on saving long term - like for a down payment on a house or for retirement - you should be investing that money. Investing doesn’t have to be risky either. If you spread your money out across different stocks or just decide to invest in exchange-traded funds, you mitigate your risk and are almost guaranteed to come out ahead.
Myth: you need a lot of money in order to start investing
Investing can conjure up images of high-powered Wall Street executives making million-dollar deals. So it’s easy to see why young adults might think that investing is useless without a sizeable chunk of money to play around with.
In reality, investing is easy and you don’t need much to get started. There are plenty of investing apps out there that make it easy for you to deposit saved money and invest it for the future. Your bank also may offer a brokerage account that you can use to invest your money however you see fit. As we talked about before, if saving for the long haul, you’re better off investing your money than letting it sit in a savings account.
Myth: you shouldn’t talk about money with others
Personal finance has traditionally been a taboo subject. You’ve probably heard from various adults that talking about money is “rude” or “disrespectful.” This leads to a lot of bad outcomes, including young adults having no frame of reference for how they should be handling conversations in their lives that involve money - from salary negotiations to figuring out what type of health insurance to get.
The truth is that there’s nothing rude about talking about money. Sharing information is how we learn best, and knowing about how your parents or friends budget, spend, save, invest, and insure themselves can help inform your own personal finance choices. Of course, not everyone is comfortable sharing details about their finances, but it never hurts to ask.
Myth: you don’t need to worry about your finances until you’re older
Credit scores, savings accounts, and investing aren’t exactly the coolest topics. It’s easy to think that because you’re young or because you’re in college, you don’t need to think about your financial future. Even parents can make the mistake of telling their kids that they don’t need to worry about their finances until after college.
The truth is that it’s never too early to start preparing for your financial future - and the sooner your start, the better off you’ll be. Credit scores take time to build, so waiting until you need one isn’t a good idea. Investing early can yield impressive results due to the phenomenon of compound interest, and saving money when you’re younger means it’ll be there when you need it - which is usually when you least expect it.
Myth: it’s hard to build credit and manage your money
Far too many young adults miss out on learning about their finances simply because they think it’s too hard to do. It’s easy for people to think that money is a taboo subject because it’s complicated, and this leads to terrible outcomes for young adults - from low credit scores to credit card debt and other bad decisions.
But in reality, getting a handle on your personal finances is easy. You don’t need to be an investment banker or even a finance major to open a savings account or an investment account. It’s easy to create a budget just by writing a few numbers down on a sheet of paper and doing some basic addition. It’s also easy to take to Google to find out what you need to know. Don’t be afraid!
There’s even more good news: Fizz is making it easier than ever for young adults and college students to build credit and learn more personal finance. Other cards and other banks make money off of these confusing personal finance myths we’ve covered. But at Fizz, we help you learn how to be responsible and set yourself up for success. With no fees, no interest rates, no overspending, and cash back at places you love, getting a Fizz card is the best personal finance decision you can make as a young adult. So don’t wait another minute! Sign up and get your hands on a Fizz card today!