4 Pieces of Stupid Financial Advice We’ve All Heard Before
There isn’t one single person in Singapore who doesn’t care about money. The poor are concerned about making more of it, while the rich work hard to keep their wealth. So it’s no surprise that everyone has their own opinion on what’s the best way to manage money. Which is fine by us, except that some of this so-called advice is so ludicrous that we feel we simply must point it out here.
1. Cut up your credit cards
It’s flabbergasting just how often you hear this advice. Targeted by well-meaning people at those with an overspending habit, the problem with this advice is that it completely overlooks the fact that credit cards can actually save people money and earn them rewards, all without costing them a single cent, so long as they’re smart enough to pay off their bills in full each month and ask for fees to be waived each year.
This advice is of practical use only to people with the most serious of overspending problems; the kinds of people who need to be put in a straitjacket to stop them from buying new shoes. For everyone else, learning how to pick credit cards for the benefits and then using them strategically is an actual money-saving trick. Your poor, defenseless credit cards do not deserve to be butchered just because someone thinks you have zero self-restraint.
2. Save 10% of your income
The danger with telling people that they need to save 10% of their income is that it creates the illusion that saving 10% of your income is some kind of achievement. Yippee! I managed to save 10% of my income! So there’s no problem if I spend the remaining 90% on OSIM massage chairs.
In Singapore, there are many households that struggle to save anything at all, while there are many who can afford to be saving much more than 10%. 10% is definitely not a figure we should be striving towards, and holding up the figure 10 as some kind of magic number is dreadfully misleading.
3. Using a debit card is safer than using a credit card
Everyone has heard of the term “credit card fraud’, even if they don’t actually know what it entails. But that phrase has made some people wary of credit cards, as if they might morph into monsters in the middle of the night and attack your family with their plastic fangs. Therefore, debit cards must be safer. Right?
Like many blanket statements, this isn’t true most of the time. For one thing, if a fraudster gets hold of your credit card details and makes unauthorised charges, you can call up the bank and contest the charges, meaning you won’t end up having to pay for them. On the other hand, someone who gets hold of a debit card can withdraw funds from your account, or make fradulent charges using your debit card details, withdrawing money directly from your account.
In Singapore, if you lose your debit card you cannot lose more than $100 before you report the loss to the bank, which will usually refund the rest. However, you can lose more if you were negligent, committing fraud yourself or didn’t inform the bank as soon as you could after realising your card was lost or stolen.
A stolen credit card shouldn’t give you as much of a heart-attack as a stolen debit card can, since the fraudulent charges can be very quickly reversed, often in under 24 hours, all without your having to pay a cent. On the other hand, it can take several days or even weeks to have any money stolen through your debit card restored.
4. Property is absolutely the best way to invest your money
This very dangerous piece of advice has resulted in many Singaporeans trying desperately to amass savings in hopes that they can use it to downpay a property purchase… in 20 years’ time when they have enough. In the meantime, all that money languishes in their bank accounts, losing value thanks to the ravages of inflation.
You might be surprised to learn that Singapore stocks actually performed better than property as an investment over the previous decade, beating out property by 1 full percent. Stocks shouldn’t be seen merely as a short-term investment. While property is still a less risky investment, to say that it’s the best or the only way to invest is foolish.
If you are clueless about anything to do with investing, you can start by reading MoneySmart’s Investing Section in our Learning Centre. This will give you a good starting point should you be looking to invest your money this year.
Do you think the above advice is stupid or sound? Let us know in the comments!