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12 Myths Everyone Believes About Money

We know that money doesn't grow on trees, but there's still a few weird myths we believe. But Zopa - the people who cut out banks to give customers better rates, know a thing or two about money and how best to make it work harder for you.

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1. It takes money to make money

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This is just a myth that the mega-rich have started to keep the little man down. Successful start-ups can begin when people invest time, training or energy rather than massive cash injections. And there's nothing to say the money has to come from you: you can use crowdfunding sites like indiegogo or Kickstarter to get financial support on a good idea in order to make it happen.

2. Buying your own place is better than renting

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It depends on the area you buy in. Property prices ebb and flow so if you buy before a property bubble bursts, you could find yourself in negative equity.

You've also got to think about cost of living (property taxes and maintenance - landlords pay for the majority of repairs, unless you've got a bad 'un) and quality of life: can you live closer to work in a nicer place if you carry on renting? Why buy a smaller place, especially if you'll be adding time and travel costs to your day?

3. Doing up your home is a good investment

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People make the mistake of pouring money into improvements that won't see any returns: you might want a second sitting room instead of a garage, but in a street with no resident parking, you've just lost a major bargaining chip.

4. Only greedy people get wealthy

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Some of the biggest philanthropists are wealthy, while some of the biggest misers are poor. Though there's been some studies that show that power (not money) makes people less empathetic to others, there's no reason why good guys can't become wealthy.

5. Paying in cash will help you save money

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While studies have found that people spend more when they shop with cards (because it is invisible, therefore free, money, right?) it's too easy to spend cash when you have it in your pocket.

If you want to be disciplined, the best way is to draw all your money out for the week and put a daily allowance into seven separate envelopes.

NB: Keep in mind, if you don't use cards, ever you can't take advantage of their cash-back incentives, points, or other perks like purchase protection. And if you lose a wallet fat with cash, that's it gone for good.

6. You should save 10% of your income

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Most people don't realise that this means "As long as you start by age 25 and never stop saving 10% of every pound you earn until age 65."

They also don't realise that you need to save this for your retirement - using the money for a deposit, nice holiday or anything else brings you back to zero.

7. Tradition dictates that an engagement ring should cost two months worth of salary

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This 'tradition' was made up by jewellery companies to increase their profit margins. Spend whatever you want - and it doesn't even have to be a diamond.

8. You need a perfectly clean credit history to get a loan

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Not true. Every lender scores you differently when assessing whether or not to lend you money. There’s not some catch-all naughty or nice list of credit out there.

To give yourself a fighting chance of gaining credit make sure you’re on the electoral role and are on top of your payments for any existing debt.

9. You can build up your credit score by maxing out your credit cards then paying it off

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Spending over your limit may trigger further charges, so if you spend £100 of a £150 available balance each month, you may want to consider asking to increase your limit to £200, and still spend £100 each month – all while making sure you pay it off on time.

11. You're too young to start a pension

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You're never too young to start a pension, even though most of us don't bother until we're in our 30s. If you started to put £75 a month into a stakeholder pension when you were 21 you could retire at 65 with a rainy day fund of £337,000 (£12,700 a year).

If you did the same at 30 your pension would only be worth £171,000 (£6,470 a year).

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