I’ve always been a little in love with the idea of saving my money. It just seems so frugal, sensible and reassuring. The trouble is, I can just as easily talk myself out of saving as I can talk myself into it.

These eight savings myths are not my friend when it comes to reaching my financial goals—luckily, none of them are true! By debunking these eight savings myths, you could be on your way to saving and investing into your financial future as early as NOW!

1. Savings Myth: The best way to save is by cutting expenses.

  • Savings Truth: The best way to save is by increasing earnings.

The old saying, "a penny saved is a penny earned" is alluring, but it’s not accurate. The truth is, thanks to inflation and other economic factors, that penny saved will carry less savings clout as each year passes.

While it’s never a bad idea to trim expenses where possible, the real key to a successful savings plan is to boost earnings. Whether this means asking for a raise at work, raising your prices for your online store, taking on a second weekend job or some combination thereof—the more you earn, the more you have to save, period.

Resource: 7 Super-Easy Ways to Earn Cash and Rewards

2. Savings Myth: The best way to save the most is to use a cash-only system.

  • Savings Truth: Paying with credit can often net you more cash to add to your bottom line!

So long as you pay off your credit card balance in full each month, in many cases it makes more sense to pay with credit than with cash. Some cards can earn you as much as 3% cash back on all purchases, and rewards and points can add up to free trips, gift cards and more.

Plus, your earned cash gets to sit in savings a bit longer each month, earning small but still important interest.

Resource: What You’re Missing by Not Using a Travel Rewards Credit Card

3. Savings Myth: You need a high risk tolerance to make savings worth it.

  • Savings Truth: Choosing a savings vehicle that carries more risk than you are comfortable with can and often does backfire.

Investment experts caution savers against investing too heavily in high risk products or services. Rather, the key to building a long-term, lucrative investment portfolio is "diversification"—which means to build a portfolio full of different types of investment vehicles (stocks, bonds, mutual funds, real estate, etc.) with different risk levels (low, medium and high).

As well, when it comes to long-range savings goals, a slow and steady strategy will win out nearly every time over "invest and get rich quick" schemes. To learn more about different types of investments—read our Ways to Gain Interest series to find out what works best for you.

Resource: Choose the Right Interest-Bearing Investment Bonds

Resource: What You Need to Know About Certificates of Deposit

Resource: What Mutual Funds Are and How to Invest

Resource: Why You Should Include Stocks in Your Investment Portfolio

4. Savings Myth: To keep your savings safe and strong, put it in the bank.

  • Savings Truth: Today, financial experts often equate putting savings in a bank savings account with squirreling it away under your bed. It will earn about the same amount of interest and be just about as safe.

Rather, you want to keep some money in savings (or in your mattress) for an emergency fund, and invest the rest in higher interest-bearing vehicles that can help your savings to grow. Otherwise, you can already pretty much predict what you’ll have saved later by tallying up what you’ve saved now!

Resource: Open an Interest-Bearing Savings Account

5. Savings Myth: You need to have a lot saved before you can start investing.

  • Savings Truth: You can start wherever you are to save and invest.

Apps like Digit make it so easy to save you will probably forget you are even doing it, and apps like Acorns can take pennies and turn them into an investment portfolio (both apps are free).

Resource: 2 Fab Apps to Help You Start Saving and Investing

6. Savings Myth: I'm too young/too old to start saving and investing.

  • Savings Truth: You’re certainly never too young, and definitely never too old, to start saving and investing those savings.

Even if you plan to retire in a year or two, your money can continue to earn interest up until the actual moment you need it. And no matter how young you are, you’ll never be too old to appreciate having more savings tucked away for later!

Resource: 7 Fun & Easy Ways to Get Your Whole Family Involved in Saving Money

7. Savings Myth: Buying a home is always a good savings/investment strategy.

  • Savings Truth: This only applies if your house appreciates at a rate that exceeds the annual inflation rate each year you own it.

However, if your house loses value, if you need to sell it before you can realize its appreciated value, or if you end up spending more on pricey repairs, taxes or insurance than the increase in value—you could wind up with an investment lemon on your hands. And even the mortgage interest deduction you can take still won’t offset the amount you pay annually in mortgage fees.

Resource: Buying Your First Home? Don't Make These 5 Costly Mistakes!

8. Savings Myth: The best way to save more is to stay in a lower tax bracket to keep taxes low.

  • Savings Truth: See #1 (above).

The actual truth is that you’ll only pay the higher taxes on the amount you earned that tipped you over into a higher tax bracket (not on your entire annual income minus deductions). For the rest, you pay the lower tax bracket for that year—and you have more to save and invest towards your future!


Don’t Fall for These 8 Savings Myths!