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7 lies your parents told you about money - when older generations absolutely should not be respected

Parents lie to their children. Sometimes - like the with existence of Father Christmas or the tooth fairy - it's to preserve the magic in the world.
Sometimes, it's to shield us from the harsh reality of life.
The problem really occurs when they think they're right, but really, really aren't.
This is never more true than when it comes to money.
The world of finance has changed vastly over the past ten years alone, meaning what was true in the past no longer applies.
On top of that, millions of people were never really on top of it in the first place - holding to simple wisdom as if it was a comfort blanket.
So here are 7 of the things older generations past on as 'wisdom' that are simply not true in today's world.

1. Never a borrower or a lender be

Fine, don't get a house. Because try that without borrowing any money.
Oh, and don't “save” anything in a bank either – because what you're doing there is lending them money in return for interest rates.
Oh – and forget about 0% credit cards, which used right let you not only spread the cost of a purchase interest free, but can give you additional protection when you make that purchase.
University? Forget it. Business loans? Nope. None of that either.
Debt is a tool like any other – used wrongly it can cause great harm. But it's utterly facile to say you never need it - and avoiding it totally will probably make you worse off in the long run.

2. Your money's safe in bricks and mortar/House prices will always go up

This isn't true either. While, overall, house prices have trended up, we're living in an oddity in terms of house prices at the moment.
Generally, prices fall every 7 years or so – at the moment they've been rising for longer than that, with the Government and the Bank of England doing all they can to support them.
It's unlikely to last – and a widespread recession could kill prices as repossessions and job losses could see the market crash again (no one mention Brexit risks).
Secondly, you're not buying the whole housing market. You're buying a single house.
Putting all your financial eggs in a single basket goes against another often-quoted piece of folk wisdom.
What happens if nightmare neighbours move in, or a slum landlord buys the property next door?
What if a new train line is built? Or sewerage plant? Or if there's subsidence? Or the local school or train station shuts?
We're not saying don't buy a house, just buy it to live in, rather than expecting to make any money off it.

3. Interest rates are too low

Rates don't have some sort of “natural” level – they are set by people according to the economic conditions.
Interest rates have been at – or below – 0.5% for 110 months now. You have to ask, after almost 10 years, when this becomes “normal” if not by now?
We have an ageing population, mountains of debt and falling productivity.
None of those things are going to change any time soon, and interest rates reflect that.
In Japan – which also has an ageing population with high levels of home ownership - rates fell to close to zero in the late 1990s, and haven't risen above 0.5% since – that's more than 20 years.
Put it another way - in Victorian Britain there were approximately 3.3million horses, even after the advent of the steam train. Today there are around 250,000.
But does that mean horse numbers are “artificially low” and will be rising again soon? No. Times changed.

4. Cash is king

Putting aside the fact we spent more on cards than cash last year , there are definite advantages to not using paper and metal money.
You don't get any interest on money that you keep in your wallet.
If you lose your cards, or they are stolen, you can cancel them and get them re-issued. You might well even get the money back from your bank if someone's used them – I did .
Cash that's stolen or lost is just gone.
Then there are the added benefits. You can get cashback – effectively a discount on everything you buy – with the right card. Or loyalty points and benefits like airmiles.
You also get added protection when buying with a credit card in case something goes wrong.
And that's aeons before we start talking about the practicalities of buying something online with cash, or the extra cost and practicalities of paying bills in cash rather than by bank transfer.

5. We had it worse

The best music ever written came out when you were 15. The sun always shines in your memories of school holidays. Now everything is rubbish, and people complaining about it don't know they're born.
Now, I'm not denying things were hard before, but that doesn't mean they are easy now.
Interest rates were – indeed – higher in the 70s, 80s and 90s. But house prices were also a LOT lower. So the amount people spent on mortgages was actually a fair bit less as a proportion of salaries in the 70s and 80s.
Oh, and that's before we get to the size of the deposit or rental costs while you try and save for one.
Our parents also cleared their mortgages far faster – as incomes rose quickly. By contrast, incomes have been rising more slowly than prices for much of the past few years – making it far harder to clear our debts or save.
That's before we get to the tens of thousands of pounds people now spend on getting a degree, and it's not an option to opt out for many given half the careers out there now require them.
And when it comes to tax, things aren't exactly rosy at the moment – despite a basic rate of 20%.
According to the Adam Smith institute, for most of the past 50 years – with a few of short exceptions in 1975, 1983 and 1997 – the amount of people's income that went in tax has been either very similar or far lower than it is now.
Except, of course, for millions of us an extra 9% is being added to pay for the degree our parents generation either didn't need to get a job or got for free.

6. "Annual income £20, annual expenditure £19, 19 shillings and 6p, result happiness. Annual income £20, annual expenditure £60 and 6p, result misery”

This quote from Charles Dickens' David Copperfield is trotted out a lot by the older generation as if it's Gospel. It's not.
It sounds sensible, but it's actually ludicrous, because it forgets two things.
Firstly, income and expenditure change by the year – new jobs, lost jobs, promotions and more mean planning day-by-day doesn't work. A poor year can follow a rich one, a rich one a poor one.
Having a nice 6p a year surplus doesn't really cover what will happen after your first child, or second, or third. Equally, spending more than you earn while you train for a new career can be the sensible move long term.
But secondly, and most importantly, your happiness is not dependant on what you have in the bank.
Debts – even catastrophic ones – can be overcome. Friends, family and more can bring you joy in these times.
Equally, a healthy balance sheet does not equal a healthy mind. Misery can strike the rich and the poor alike.
We're not saying there isn't a link between money and mental health – there is – but thinking your problems will be over if you get your bank balance under control or that your mental health is failing simply because of your spending is an incredibly unhelpful attitude.

7. If you look after the pennies, the pounds will look after themselves

File under: Waste not, want not.
We're big fans of saving money, paying attention to where it goes and are passionately against waste. But to pretend that if you're careful you'll be fine has two big issues.
First – if your landlord doubles your rent, or you lose your job looking after pennies, repairing clothes and never binning a bite of food isn't going to cut it. You'll still end up homeless eventually.
Put simply, you need a plan for the pounds too.
Your financial position is made up of two halves – what you earn and what you spend. You need to look at both to ensure you're in a strong position.
And the second reason this saying is a problem? It's victim blaming.
Just like the people that claim you can't afford to buy a house because you eat the odd avocado or grab a Starbucks, implying that if you fixed your spending other problems would go away is a flat lie.

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