It is often said adults that they regret not knowing about financial advice when they were younger but the truth is that not all of the financial advices might be suitable for young people. The good news about this generation is that the younger people are aware about the importance of having a good financial status. Many are turning to financial advice website while others hire a professional financial adviser at a young age. While this is well and good, there are still many myths going around about money management.
The first myth advices young people to put all their energy into paying the student loans they have accumulated. While it is good to get rid of student loans as fast as possible, it should be noted that these interest rates for these types of loan are very low therefore it is more worthwhile to use the money in paying debts with higher interest rates or invest in vessels that will give off higher return which can eventually be use to pay off the student loan as it accumulates. If the interest rate is higher than 6 per cent, pay off these debts first but if below 4 per cent then focus on paying the minimum payments and invest the rest especially if there is a high return from the investment option.
The second misconception is that younger generation should opt for Roth accounts. Roth accounts will not guarantee young people the tax break they need but the earnings is tax free once they reach 59 and a half years old upon withdrawal. The condition is that they must have the account for a minimum of 5 years. This is not ideal if planning to buy a house or saving up in cases of emergencies which in this case the most suitable option is to for pre-tax accounts.
The last and third myth is that young people should be more aggressive in investing since they are still in their prime. While this may be true in some cases, there are a few things to keep in mind. According to a financial advice website, the money might not reach a long time frame and this mindset will ignore the risks that come with the investment.