There is a lot of information out there about finances and what to do with your money. Some of it is really good advice but a lot of it is terrible advice that you should never follow.
1. A college degree for your child is a great investment – Well…yes and no. A college degree that will be affordable once they are out of college is a great investment. A degree that will put them tens of thousands of dollars in debt…not so much. When your child is getting ready to decide on college see what scholarships can be given or what grants they can get. Try to let them know that they should choose a college that will only cost them as much in student loans as they can expect to make right out of college otherwise payments will be too much to handle.
2. If you aren’t rich, a trust is not something you need – A will is important to have in case anything happens to you, but a trust is just as important no matter how much money you have. Get an attorney and go through all of your assets to put in the trust. Determine who the trustees will be when you pass. This will make things much easier on your family when that time comes.
3. Whole life insurance is a better value – This is not true. If you get term life insurance you do not have many embedded fees as it is just life insurance. With whole life insurance you have 401k options and between all of the fees that come with whole life insurance it will cost you more in the long run.
4. Bonds are better to have than stocks – While bonds do not fluctuate as much as stocks do, they are often worth less with interest. If you keep a good portion of money that you know you will not be touching for quite a while invest it in a stock. Over time inflation will kick in, the price of the stock will rise automatically, and you will have made money.
5. Buying a home is better than renting – That all depends. If you are planning to make changes or move from house to house within 10 years of buying one, it is best to rent. Mortgage fees can become high and you may lose money when you have to sell the house. If you plan on long-term, a house is a better way to go.