Chances are you've fallen for at least one of them. We're talking about money myths—those erroneous financial proclamations that get passed down from generation to generation as fact.
You know, things like “buying in bulk is always better” and "buy low and sell high" when investing.
But there’s a set of money misconceptions that seem to be plaguing one generation in particular: Millennials.
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One of the traits that most defines Millennials is the laserlike focus they have on their own needs, says "Generation Me" author Jean Twenge, Ph.D., who conducts extensive research on generational differences.
Another unique Gen Y trait?
Despite the fact that they’re facing a tough job market, they have high levels of optimism and confidence in their abilities—although they don’t harbor the same level of confidence in other people or institutions.
“Millennials are more likely to say that they think they’re above average," Twenge says. "They also want jobs that will pay more but require them to work less, so there’s a bit of a disconnect with reality.”
Taken as a whole, these distinctive generational characteristics affect everything from the type of jobs Millennials gravitate toward to how they plan for their financial future.
And with that mind-set also comes a specific crop of money misconceptions that can wreak all manner of financial havoc—like missing out on potential earnings and even flat-out losing money.
From believing cash is king to overly embracing job hopping, we break down the six biggest Millennials-specific money myths that members of the generation should consider busting.
Money Myth #1: Cash Is Better Than Credit
In theory, this rationale makes sense: Rather than habitually swipe your plastic, you should live within your means and only spend the money you have in your wallet or bank account.
But there’s more to the story behind this belief for Millennials.
According to research from a joint study by San Diego State University and the University of Georgia, members of Gen Y are particularly skeptical of large corporations, banks and credit card companies.
“Millennials bore the brunt of the recession more than any other generation and, as a result, have skepticism around credit,” explains Twenge. Therefore they have a tendency to rely only on cash and debit cards, the latter of which they view as slightly less corporate than using credit cards.
Why It's Bust-Worthy Paying with cash may help you adhere to a budget, but it won’t do your credit score any favors, says William Sweet, CFP®, president of Stevens & Sweet Financial in Tuxedo Park, N.Y.
And since it’s difficult to make a financial move without having your credit rating checked—your score can impact many things, including the interest rate you receive on your mortgage—you’ll want to keep it as high as possible.
Given how tough the job market has been, it's no wonder that many members of Gen Y believe that saving needs to take a back seat to paying down college debt.
And given that 35% of your credit rating is determined by your payment history, using plastic to pay your bills is an ideal approach to establishing a record of credit—as long as you pay off the balance in full each month to avoid getting hit with interest charges and unnecessary fees.
Some credit cards also offer perks like airline miles and cash back, which can actually help you save money. But one of the best reasons to use a credit card, says Sweet, is security.
“If your credit card number gets hacked," Sweet says, "you usually aren’t responsible for any fraudulent purchases, while a thief can clean out a bank account with cash withdrawals very quickly.”
Money Myth #2: You Can’t Save Money Until You Pay Off Your Student Loans
No matter how you slice it, student loan debt is a serious financial burden for Millennials.
According to an analysis of government data by college-planning site Edvisors, the average amount of student debt for undergraduates in the class of 2015 was more than $35,000.
And given how tough the job market has been for them—as of September 2014 the jobless rate was highest for Millennials at 6.2%—it's no wonder that many members of Gen Y believe that saving needs to take a backseat to paying down that hefty college debt.
“The numbers are really staggering for Millennials and debt,” Twenge says. “They’re in a squeeze and most of them recognize that.”
Why It's Bust-Worthy Whether you have a medical emergency or need to make a last-minute car repair, Sweet says having some funds socked away in an emergency savings account is necessary because you don't want to rack up even more debt should the unexpected happen.
That said, he’s sympathetic to the plight of Millennials. So if money is tight, he recommends paying off debt and saving by first accounting for essentials like food, shelter and clothing—and then deciding how much of the leftover discretionary income can be allocated toward debt reduction and savings.
“Putting as little as $20 a week away in savings will help,” adds Grant Webster, CFP® with AKT Wealth Advisors in San Diego, Calif. “It’s a calculated balancing act.”
Money Myth #3: Insurance Isn’t Necessary
Speaking of emergency safety nets ... according to a survey commissioned by insurancequotes.com, Millennials are less likely than other generations to have health insurance. And those who do buy health insurance typically choose the most basic policy available.
They’re not just avoiding health insurance, either—the survey also found that Millennials aren’t inclined to purchase automobile, renters, homeowners, life or disability insurance.
What’s up with this aversion to insurance?
Twenge believes it’s linked to the generation’s incredibly high levels of optimism. Case in point: A recent survey found that 49% of Millennials believe the country is on the road to its best years, reflecting the group’s glass-half-full outlook.
The problem with such hopefulness: “Because they’re so optimistic, they think that they won’t get sick or have a car accident—and therefore don’t need insurance,” Twenge says.
Why It's Bust-Worthy Neglecting to carry insurance is a huge risk that could deplete your finances and upend your life, says Sweet. And the gamble is particularly tricky for Millennials, who tend to be underemployed and don’t have much money socked away to be able to cover a crisis.
According to a study by the management consulting service company Accenture, 46% of Millennials who graduated in 2012 and 2013 have jobs that don’t require a college degree. As a result, they’re not receiving adequate benefits nor meeting their earning potential, leaving them financially unprepared in the event of a health or other emergency.
“Millennials are more likely to say they want a job with a lot of money, status and prestige ... that also has a lot of vacation and time for a personal life."
Webster says health, auto and renters insurance are the key forms of coverage Millennials should consider carrying, with health insurance topping the list. “Even if you don’t go to the doctor often, one trip in an ambulance or even a short hospital stay can bankrupt you,” he says.
If you own or drive a car, auto insurance is another must-have. Accidents are a fact of life—most drivers are involved in at least three crashes over their lifetime, and the average claim for injuries is north of $20,000. Insurance can help you avoid a potential legal issue. So make sure your auto coverage meets your state’s minimum requirements, and you know exactly what you’re liable for in the event of an accident.
Money Myth #4: There Aren’t Any Drawbacks to Job Hopping
Jumping from one job to another has become second nature for Millennials, who are often in search of the next best thing for their career.
“They’re more likely to say they want a job with a lot of money, status and prestige ... that also has a lot of vacation days and time for a personal life,” Twenge says. This type of golden-ticket job package isn't easy to come by, which is why many 20-somethings bounce around in the hopes of landing that dream job.
But even if they find it, they may not stick around for long.
According to a Future Workplace “Multiple Generations @ Work” survey, 91% of Millennials expect to stay in a job for less than three years—compared to 4.6 years for the average worker, based on data from the Bureau of Labor Statistics.
But with that kind of movement comes a potential loss of thousands of dollars in income down the road, specifically when it comes to their 401(k) plans.
Why It's Bust-Worthy Although 94% of employers in the U.S. offer 401(k) plans, and 92% of companies match employee contributions, less than half of such plans immediately vest all participants.
So while all of the money you contribute to your 401(k) is yours, it usually takes three to five years before you can own all of your company-matching contributions. Leave your job before then, and you’ll lose some (or possibly all) of that free money. Ouch!
To help cushion the blow if you're considering a new job offer, be sure to factor in how much you stand to lose by leaving your current company’s 401(k) program. Then, during salary negotiations, you can try to make up some or all of the money you’d forfeit by jumping.
But if you’ll be leaving too much behind, and you’re just a few months away from being fully vested, Webster suggests hanging in there. "Those extra months could end up saving you a lot of money down the road," he says.
RELATED: Confessions of Job Hoppers
Money Myth #5: Investing in the Stock Market Is Way Too Risky
When the market crashed in 2008, investments dried up, 401(k)s tanked—and more than 8 million people lost their jobs when companies cut back their workforces over the next few years.
This financial meltdown had a huge impact on Millennials’ attitudes toward money, in general—and the stock market, in particular.
“In their personal financial history, what they remember most is the big decline in the stock market,” Twenge says. “Maybe they saw how it impacted their parents, or they’d bought stock themselves. Regardless, they witnessed just how much of a negative impact the stock market can have on people.”
Unfortunately, while older generations have experienced market highs—like the boom times of the1980s and 1990s—the recession is largely all Millennials have known about the market. So it's no surprise that this generation feels uneasy about stocks.
Why It's Bust-Worthy Investing in the stock market is one of the best ways for Millennials to help their savings grow with inflation, says Webster, adding that they have the time to wait out market downturns and earn back any losses.
“If you’ve parked your retirement savings in a CD earning less than 1%, and inflation is 3%, you’re essentially losing 2% of your savings a year,” he points out.
Study after study makes the case for investing in the stock market: Yale University economist Robert Shiller recently reported that the market earned an annual average return after inflation of 6.8% since 1871—even with recessions.
Webster recommends that skittish Millennials start by investing only money they plan to use for retirement—and opt for a diversified index fund, which tends to be lower risk than individual stocks because it’s less prone to market volatility.
“Stay away from individual stocks unless you have the time, knowledge and investing time horizon to stomach the inherent risk in owning them,” Webster says. "While you have the potential to yield strong gains on individual stocks, you can also lose a lot if something goes wrong with a company or its own investments."
Mom and Dad may offer sound financial advice, but failure to seek a second opinion could be detrimental for Millennials’ bottom line.
Money Myth #6: You Can't Trust Financial Advisers
Millennials don’t just have a distrust of banks and financial corporations—most members of this generation also eye financial professionals with some measure of caution. In fact, according to a study by Scratch, a unit of Viacom, nearly three quarters of Millennials said they’d rather go to the dentist than listen to financial advice from a banker.
Part of their reluctance may stem from the fact that they haven’t seen financial services targeted at people like them—an opinion voiced by 59% of Millennials in a recent survey from BNY Mellon and the University of Oxford.
“Millennials are highly individualistic and don’t feel comfortable trusting someone else with their money,” Twenge says. As a whole, they tend to think they can just figure it out on their own with a little input from a trusted source like their parents, she says.
Why It's Bust-Worthy Mom and Dad may offer sound financial advice, but failure to seek a second opinion could be detrimental for Millennials’ bottom line.
Why? Parents may not be up-to-date on the latest ways to achieve financial growth—they only know what’s worked for them.
Although Sweet says Millennials are partly right about financial advice not being tailored to them.
“Financial advisers tend not to spend a lot of time with young people because they don’t have much money yet,” he says, noting that a commission-based financial adviser stands to earn less serving younger clients—at least in the short term.
But the good news is that there are a growing number of financial advice websites and financial advisers that cater to younger generations. So what should you look for in a financial adviser if you're a 20-something?
“You need to find someone who will take the time to get to know you and your goals—being in a big rush should be a red flag—and make recommendations that are in your best interests,” Sweet says. “Typically, this means finding someone who doesn’t work on commission, so don’t be afraid to ask about their compensation structure.”
As with any money myth that could be standing in the way of you making progress on your finances, the first step is to bust the barrier.