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5 Debunked Money Myths to Know
Money Management

5 Debunked Money Myths to Know

How have you been primarily learning about money? It is safe to say friends, family and schooling have had a major impact in how you think and deal with money.

Would you say with confidence that the sources of information about money that you use are credible, accurate and reliable? 

The truth is that there is a lot of untruthful information being peddled everywhere you turn around you about money. This may be a deliberate attempt to misinform people or innocent propagation of ignorance. Either way, you individually have a lot to lose if you follow the wrong information. 

In this article, we explore 5 common money myths that you should stop believing in today and improve your chances at achieving your long-term financial goals. 

Myth #1: Planning for Retirement in Your 20s & 30s is Too Early

This belief is held by a lot of people early in their careers who see retirement as something that is several decades away and are confident they have enough time to prepare - just not now.

After all, people usually retire at the age of 60 or 65, right? 


It is indeed true that in your 20s and even 30s, retirement may feel ages away and the temptation to push forward retirement saving may seem like a good idea. You may convince yourself that redirecting that money to other needs is the smart thing to do. 

In reality, the enormous amount of time you have in your 20s and early 30s is an incredible gift. Time is the biggest factor in retirement saving. Because of the power of compound interest, the earlier you start saving for retirement the less you have to contribute each month and the more you will have in total on retirement day.

This is true even if you compare that to contributing much higher amounts for a lesser period of time. 

Take this example; Anne and Brian are saving $100 a month at a 5% annual compound interest, but Anne begins doing so at 25, while Brian starts at 35. 

The 10-year head-start gives Anne $162,000 at the chosen retirement age of 65 while Brian only gets $89,000 at the same age of 65. She gets almost twice as much at retirement despite Anne only contributing $12,000 more than Brian.

Below is yet another example of someone in their mid 30s as compared to someone else in their mid 40s. 


From the above illustrations, it is easy to see why saving early for retirement is the best thing to do. You do not have to save a lot monthly while being assured of huge returns on retirement day. 

If you delay retirement saving, you will either have to contribute huge monthly amounts or settle for less returns on retirement. And contributing higher amounts does not necessarily mean you may have higher returns. 

Myth #2: It's not Worth Saving if I can Only Contribute a Small Amount

This myth is associated with statements such as ‘I will start saving as soon as I am making X amount per month’, ‘I am not earning enough to save yet’, ‘I need to be making X per month to save’ or ‘I will save a big lump sum once I earn enough money - I know I am not late!’ and so on. 

The idea that you are not earning enough money to save is surprisingly entertained by people across the income levels such that as you go up the income ladder, you may fail to notice your improved ability to save. 

Truth: Saving is an extremely personal journey such that there are no benchmarks to follow or thresholds to cross in terms of how much you can put away in absolute terms. Save whatever you can and do so consistently and it will all eventually add up. 

If you are just at your first job and earning an entry-level salary, you should not wait until you are mid-career to start saving. Follow the 50/30/20 budgeting rule to determine the appropriate amount to save as you live within your means. 

With your entry-level salary, you can easily build up an emergency fund, which is great for your career since you can afford the luxury of quitting, staying a few months considering job offers, options etc. as compared to the desperation of losing a job without any financial cushion. 

If from the get-go you start contributing even as low as Ksh2,000 monthly to your retirement account, you will have a significant amount saved up plus compound interest by the time you are entering mid-career which is when those who believe in this myth will be starting to think about saving - you will be far ahead such that they would have to double or triple their contributions to catch up with you. 

Whether you have a steady or an unstable income, you should set aside some money for saving and investing.

Here are some tips to help you start small and stick with it.

  • Ensure that you plan for savings and investment in your monthly budget.
  • If you've never or have fallen behind on your savings plan - get started asap. Start by setting aside a realistic amount and gradually increasing the savings amount without compromising your financial obligations.
  • To avoid lifestyle inflation and to maintain or improve your quality of lifestyle, make significant budget changes. For example, save as much as you can while grocery shopping and set aside a “sunny-day fund” to help you enjoy your money responsibly
  • Where possible, automate your payment - this makes savings mandatory every month as soon as your salary is deposited. 

Myth #3: You need A Lot of Money to Invest

Proponents of this viewpoint view investing as high risk gambling. You could lose all your money, they say, so start investing when you have X amount in net worth or when you don’t have to worry about money.

Truth: Maybe this might have been true three or so decades ago. In reality, today there are tens of options where you can invest very small amounts of money and make modest to high returns annually. 

For instance, in Kenya, you can invest as low as Ksh1,000 into a money market fund, with voluntary minimum top-ups of whatever amount you can, when you can. You can build this fund and then buy a long-term treasury bond to finance your child’s education when they are ready for college, for example. 

The bright side of saving for investments is no amount is too little because consistency is the key to genuine, fruitful progress.

It’s better to visualise your finances as a personal tool that works to contribute to your quality of life. This way, you can regularly set an amount of your income towards active and passive investments - to better meet your financial goals and nurture your financial discipline. 

Myth #4: You Don’t Need Emergency Liquidity

If you’re earning a steady monthly salary or income, it is likely that you may build a false sense of security so much that you may think having an emergency fund is of no use to you. 

Basically, you believe that you’re all set for any emergency, as long as you have a steady source of income while the rest of your money is held in illiquid or less liquid vehicles such as bonds, stocks, real estate and fixed deposit accounts. 

Truth: In reality, when emergencies happen, they better find you with hard cash ready to go or things can go really wrong; you may have to incur huge losses trying to liquidate illiquid assets such as real estate or get into high-interest emergency debt. 

The good news is you can set up a cash "safety net" for different emergencies ranging from family emergencies to business emergencies. 

Begin by understanding what an emergency fund is and why it's crucial to have one. 

Once you're knowledgeable about the fundamentals, you can confidently go on to set up your preferred emergency fund

Read Also: How Much Emergency Money Should a Family Have In 2022

Myth #5: Having a Loan is a Bad Idea

Either you have the money or you don’t, but whatever you do - do not borrow. This is the anthem of those who fundamentally believe that any kind of borrowing is bad, should be avoided at all costs and is certainly going to be detrimental to one’s financial wellbeing. 

Truth: A loan in itself cannot be "bad". 

However, your reasons for getting a loan plus how you spend the credit received will determine if your decision to take was a good or bad one.

Case in point: Taking a loan to build an asset that yields a higher return than the interest is a profitable, savvy money move. It's better than waiting to raise funds to build or buy the same asset. 

The latter option to wait could mean inflated prices as time passes. That means you may experience more difficulty acquiring the asset, or you may never  get to acquire an asset due to limited finances. 

In fact, debt is one of the sure ways of building wealth using other people’s money. In this case, you are using the bank’s money to take advantage of business opportunities, acquire appreciating assets or afford something that is cheaper today than waiting to acquire it later.

You, however, have to be very smart in determining where and whom to borrow from, understand loan terms and get the best deal that doesn’t lead you into a cycle of borrowing. 

You can use the Money254 loan finder to compare different loans offered by trusted financial institutions in Kenya before making your decision to borrow. 

Also Read: Good Debt Vs Bad Debt: How to Tell the Difference


You may not be a financial expert or an economist, but you always have the option to choose the right play. Assume nothing. 

While popularly held beliefs about money may seem quite convincing - especially when they come from people we respect such as parents, friends, leaders and teachers - it is important to actively seek the truth.

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Gathoni is a skilled content developer with over 5 years of experience in content development as a graphic design and copywriter, in different industry sectors. Her passion to nurture positive, stronger, communication impact continues. You can find her on LinkedIn here.

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