Father knows bestYou love your dad, but you don't have to buy everything he taught you about money.

DailyFinance
gives the gift of knowledge to papa -- and his kids -- on Father's Day by debunking a few financial myths he might have held held true. He still deserves the socks and the cologne. Just maybe don't trust him with your portfolio.

Myth 1: Save for an Emergency First, Pay Off Your Credit Card Later

If you follow that piece of advice, Visa will become your daddy. The meager interest you receive for socking money away in a savings or checking account pales in comparison to the massive interest charges you're racking up on your plastic. And let's not even get into the psychic weight of lugging debt and the potential for your credit rating to recede faster than your father's hairline.

Ideally, you want to save and pay down your debt at the same time. "Otherwise, if you only pay down your debt and don't have cash when something comes up, you'll get back into trouble again on your credit cards," Fern Schwartz, wealth management adviser at Merrill Lynch (BAC) in Pittsburgh, told DailyFinance. "Pay down your highest interest rate card down first."

Myth 2: You Can Rely on an Inheritance

Sometimes dad tells stories. Most of the inherited wealth over the last decade has flowed to only 7% of the already wealthiest Baby Boomers, according to Mitch Slater, senior vice president of investments at UBS Financial Services (UBS) in Westfield, N.J. And since the elderly are living longer than ever, much of their savings are going to long term care and other medical costs. That's leaving a median amount of $49,000 getting passed down to the next generation. "Good luck with that fortune," Slater said.

Myth 3: Costs Go Will Down When You Retire

Somebody's favorite patriarch needs a reality check. Costs go down only if you cut down on expenses, and how many of us are prepared to do that?

"Most people don't have their homes paid off and all the costs that go along with the home are expected to rise alongside my firm's inflation projections of 5% a year over the next decade," Slater said. "Then you have the sandwich generation costs to deal with. Aging parents costs more than babies." In fact, adult-age children lose an average of about $300,000 in wages, pension and Social Security when they stay at home to care for elderly loved ones, according to a new MetLife (MET) study.

Myth 4: You
Need to Make More Money Before You Can Start Saving

We think Dad might have been napping through the recession. You don't know if your income will increase. Worry about the money you're earning right now.

"Pay yourself first -- that's saving -- and try to focus on managing your money in a way that allows you to minimize debt," Slater said. "Without doing this you will fall into the trap of always spending the cash that's available."

Myth 5: You Don't Need Life Insurance Because You're Young and Healthy

When you're young and healthy is the time to buy life insurance. It's inexpensive and will protect your family in case of your untimely demise. An average 20-year term premium for $250,000 in coverage generally costs $300 to $500 year for a nonsmoker under 35 with no drunk-driving arrests. "Then you don't have to worry if you get sick in the future, said Merrill Lynch's Schwartz. "And if you do have debt, such as school loans or car loans, the insurance will be available to pay that off."

Myth 6: All You Need Is a Big Down Payment to Get a Great Mortgage Rate

That might have been true before the credit crisis hit, but not now. You'll need a sparkling credit rating score to go with that flash of cash. Lenders are spooked. Remember when they gave out home loans the way dentists hand out toothbrushes? Big bucks up front still catches their attention in these days, but it takes a thumbs-up from Experian to seal the deal on the lowest terms. "You really want to have had a clean credit history to get the best rate," said Ann K. Trainor, vice president of investments at UBS in Westfield, N.J. "Otherwise it may not matter how much you are willing to put down."

We didn't mean to hurt your feelings, dad. You still toss a mean knuckleball. And that tip about buying low and selling high? Still golden.


Also See: What Super-Rich Dads Teach Their Kids


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bobwoodger

Use "other" peoples money first! i.e. take advantage of "interest-free" promotions offered by credit card
companies. Take 15% out of every pay check and invest it. NEVER carry cc balances! Shop at thrift
shops..never pay full price for anything. Get 3 quotes for everything involving home improvement.
Keep your car maintained on a regular basis. Read newspapers online. As a single person, I no longer
carry life insurance. Donate your body to a medical school. They handle all the arrangements, including
a very impressive memorial service and at NO COST to any family members! John A. Burns Medical
School, U of Hawaii is one school among many who have shown dignity and respect regarding this.

June 20 2011 at 10:21 AM Report abuse rate up rate down Reply
mrspelosi

One thing we all know isn't a myth and that's to trust a democrat like me to hold the piggy bank. My out of control reckless spending over the years has caused great harm to the American people.

June 19 2011 at 5:26 PM Report abuse +2 rate up rate down Reply
rjoh959287

Save a portion of your pay each month, purchase items needed on sale. Dont use your credith card if you can not pay it when the bill arrives.Pay cash for your Cars even if you have to start with a older car and work your way over time to a newer model.Invest in education using Grants and a ccomunity Collage.use the Librarry insted of purchasing Books,Magazines etc.Do repairs your self after educating Your self again the Librarry is the spot to go.

June 18 2011 at 12:32 PM Report abuse rate up rate down Reply
rini1946

they got it all wrong first spend like you are going to die this week. Once you owe a few 100 thousand quit your job and go on welfare and file for bankruptcy. Hide most of you assets so you can sell them for cash later to buy gas for you boat . I bet you wish you had me for a dad.

June 18 2011 at 1:36 AM Report abuse rate up rate down Reply
bob

I invested in a tall and big mans store in Japan, I'll be set for life!!!

June 17 2011 at 8:19 AM Report abuse rate up rate down Reply
dterraman

great grandpa told me to fight the central banksters and win, or suffer all the days of my life

June 17 2011 at 5:52 AM Report abuse rate up rate down Reply
sugarcreekchile

Dad is not always the financial whiz in the family. There are some very savvy moms out there. I was widowed when my son was 3. My advice to him was to always pay the low yearly premium on the $50,000 insurance policy his grandmother set up for him when he was a baby. He may not appreciate it in his 20's but when he has a family, he will and he'll never get one for less. Don't impulse buy, research what you want, shop for the best price and pay cash. If you have to charge, don't charge an item you can't pay off in 6 months. If it takes longer than that to pay off, you can't afford it. Keep 2 or 3 credit cards, make small purchases on them and pay off at end of month to keep your credit rating high. On big ticket items like cars, always haggle and play sellers off one another to get the best price. When financing, pay more each month than the monthly minimum payment.

My son's one of the most financially responsible people around. He always has a few thousand in checking, gold and silver he's bought, a 401k, and is attending college on the GI bill, saving money by living at home and helping with household expenses. While in the military, he paid off a new motorcycle in 1 year and with money he'd saved, before leaving the service last year, paid cash for a nice sports car. He owes no one, has his own bedroom and a "man cave" in the house, both that he's furnished himself with nice furniture, throwing out all the old kid's room stuff. He listened well and is financially secure with a good head on his shoulders when it comes to money matters. Even though he'll have a modest inheritance from me, he never wants to talk about it because he wants me to live to be 100.

June 17 2011 at 1:49 AM Report abuse rate up rate down Reply
rpopeteacher1

Here' my father's adivce which I have followed: Pay cash for assets that drop in value and finance assets that increase in value.

June 17 2011 at 12:05 AM Report abuse +1 rate up rate down Reply
Michael

Sorta disagree with Myth 1: EVERYONE should first and foremost SAVE enough money to cover several months of living expenses in case you suddenly lose your job. This includes rent, food, household bills, car payments, and, yes, credit card payments. Definitely pay something to your credit cards while building this emergency fund, but the focus should be on getting enough in your account to cover at least 4 to 6 months of having no income at all--and then don't touch it! (unless you lose your job, of course). THEN concentrate on paying off those cards--that's the best investment anyone can make for themselves, but if you don't have income, or an emergency fund to cover loss of income, you won't be able to make ANY credit card payments and you may end up defaulting and/or ruining your credit rating. And THAT can cost you LOTS down the road!

June 16 2011 at 11:11 PM Report abuse +1 rate up rate down Reply
1 reply to Michael's comment
rini1946

I agree with you but the first thing is not to use credit cards unless you can pay them off every month

June 18 2011 at 1:31 AM Report abuse rate up rate down Reply
zattico

dad lived in a low inflation economy you live in a higher inflation savings are taxed and their money it can not buy what it once could they are being expropriated by the government the money you make has to work a whole lot harder just to remain even better to spend it before it loses all it power to buy anything holding money is stupid turn it into commodities or whatever is increasing in money and be able to get out of it quickly

June 16 2011 at 9:49 PM Report abuse rate up rate down Reply