Wine is not better because it is expensive and the bank is not the best place for your savings

Leer en español: "Lo barato sale caro" y otros mitos acerca del dinero

While we usually learn to use money in practice and intuitively, there are many beliefs associated with money that do not necessarily correspond to reality and often guide our decisions despite being wrong. Here are some myths about money:

Leja em português: "O barato sai caro" e outros mitos sobre dinheiro

1. The safest place for your money is the bank

Probably, the bank is a safer option than having the money under the mattress or in the closet, but it is not necessarily the best alternative to save your savings. Most accounts that generate interest have very low rates so even if you have saved millions, you will receive practically nothing for having your money in the bank.

It is basic to have money that can be easily accessed to pay monthly obligations along with a savings available in case of any emergency. However, once those expenses are considered, the extra money does not produce greater profits in a savings account and could, instead, be invested more profitably. According to Forbes, among the best investment options to consider in 2018 are the peer-to-peer lending platforms, real estate, and the stock exchange.

2. "You get what you pay for"

It is true that there is usually a relationship between the price and the quality of the products, but spending more does not always guarantee a better quality. For example, many generic drugs can be as effective as brand-name drugs. According to the Food and Drug Administration of the United States, a generic drug is created to be the same as a brand name in dosage, safety, quality, and effectiveness.

Of course, the national regulations and the control of the health entities are decisive in this case, but the quality standards are getting better in most places. Brand-name drugs are more expensive for research, development, and intellectual property issues, not because of significant differences in the composition and manufacturing process of the products.

Another good example at this point is wine. Many studies have pointed out that there is no direct relationship between the price and quality of a wine bottle. For example, an experiment at the University of Hertfordshire revealed that, when they do not know the price, people only identify if a wine is 'expensive' or 'cheap' 50% of the time, which may be simple luck. The study suggests that many people pay basically for the label, because there are cheap wines that taste as good as those of higher price.

3. Debts are bad

Many people think that getting IGNORE INTO debt is a bad idea, but this is not always the case. The debts that increase your opportunities in the future are a good strategy, and often necessary, to improve your economic situation. In fact, borrowing is natural, people do it, companies do it, and so do countries all the time. According to Paul Krugman, a renowned professor of economics, Britain has not been debt free since 1692.

However, not all debts are good. Debt can be useful as long as it is done in a controlled and intelligent manner, with a relatively viable plan to pay what is owed. Taking a mortgage to buy a house, for example, can be a good decision, because saving the money to pay up front is quite difficult and, in addition, houses tend to be valued for what would be a good long-term investment. On the contrary, getting IGNORE INTO debt to buy designer clothes or vacationing in luxurious hotels is probably not the best idea.

Latin American Post | Paula Bautista

Translated from ""Lo barato sale caro" y otros mitos acerca del dinero"