Discover the five most common money myths that could jeopardise your financial future. Learn the reality behind these misconceptions and make informed financial decisions for a secure tomorrow.
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When it comes to money, myths can be surprisingly persistent. Financial misconceptions often pass for common sense, but they can undermine your long-term financial security.
The reality is that many people make financial decisions based on advice from friends or social media without checking whether it is actually true and relevant to their situation. Taking the time to understand the facts now can prevent costly mistakes later on.
Myth: You need multiple funeral policies to fully cover funeral costs
Reality: Making sure that our own funeral costs are taken care of, and even taking out policies to ensure that our loved ones get the send-off they deserve, is something most of us take very seriously. But taking out multiple funeral policies may not provide the protection we think it does.
The challenge here is that funeral cover can be significantly more expensive per rand of cover than underwritten life insurance. Underwritten life cover, on the other hand, is often more affordable and provides significantly higher levels of cover.
Myth: Life insurance only becomes necessary as we get older
Reality: Many younger adults delay taking out life insurance, assuming it is something that they only need once they have accumulated more assets, gotten married, or had children. This assumption overlooks the financial benefits of starting early. Younger people generally qualify for lower premiums because their risk profile is lower, and taking out life insurance earlier can also help you avoid exclusions that may apply if medical conditions develop later in life. Starting earlier gives you more options and greater certainty about the cover you are putting in place.
Myth: A will is only necessary if you have children
Reality: While a will is essential for ensuring that your minor children are cared for according to your wishes after you pass away, its role goes much further than that. A valid will also ensures that your assets – from your house, to your car, or even the money in your bank account – are distributed as you wish them to be, and can help prevent delays and disputes during the estate administration process.
Without a will, your estate will be distributed according to South Africa’s Intestate Succession Act, which may not reflect your wishes. It can also create complications for surviving family members.
Myth: Skipping your daily coffee is the secret to financial health
Reality: While it is true that every expense adds up over time, focusing on small discretionary purchases can distract from the bigger financial decisions that matter more. Housing costs, transport choices, and long-term financial planning generally have a far greater impact on financial outcomes than occasional spending on small pleasures. Financial well-being requires discipline, but it also needs to be realistic. A balanced approach to spending is usually more sustainable than trying to eliminate small habits or occasional indulgences.
Myth: Online tools and AI can replace professional financial advice
Reality: Digital tools can be useful for research and education, but they cannot fully understand your individual financial circumstances or responsibilities. Technology can help you learn about financial concepts, but it cannot replace personal advice from a qualified adviser. Everyone’s situation is different, and guidance that takes your responsibilities and risks into account can make a significant difference.
This is particularly true when it comes to protecting your ability to earn an income.
Many financial advisers consider income protection to be one of the most important priorities for working South Africans. Your income supports everything else in your financial life. If illness or injury prevents you from working, income protection can help keep your household financially stable.
Financial myths may seem harmless at first glance, especially when they circulate in casual conversations. But misunderstandings about money can negatively affect your long-term results.
Your financial decisions should never be based on hearsay. When it comes to protecting your future, it is always worth separating common money myths from financial truths.
* Cloete is the FAIS representative and training specialist at Bidvest Life.
PERSONAL FINANCE