When you think about money, do you think about just dollars and cents, or do you tend to get philosophical? It’s easy to get so bogged down in the credits and debits on your checking account that you may not have thought to ask some of the big-picture questions. Money can be confusing, after all. Here are some of the biggest misconceptions that people have about money.
Money Was Always Paper or Coin
Now that we’re moving away from plastic and into the era of virtual money with online currencies and payment methods, paper money and coins can seem so old fashioned that we assume they’ve been around since the dawn of time. Not true! Salt, animal pelts and knives are just some of the more unusual items different civilizations used for money long ago.
In general, items used for money were considered valuable in a culture and traded for other goods or services. As cultures graduated beyond simple bartering and developed more complex economies, the items used for currency became less practical and more symbolic until turning into mere paper that we recognize today. Remember: Money is only valuable because we all agree that it is, but it is, in fact, worth more than just the paper it’s printed on.
Developing Countries Have Always Had Small Economies
Economic prowess shifts among civilizations over time, just as political power does. England used to be the most powerful nation on earth, though you wouldn’t know it today. Greece used to be the center of democracy and intellectual advancement. Likewise, India and China were the top economies of the world in the years before the Industrial Revolution. Though it may take decades or even centuries to see the changes, the world’s economic picture is a lot more fluid than we often recognize.
With the Right Expertise, You Can Beat the Stock Market Average
Even professional stockbrokers and traders have trouble coming out ahead of the average stock indices year after year. Sure, some years are better than others, but there are plenty of other times when the losses are greater than the average. Understanding the timing of the market is largely just a guess, even for experts, and very few investors will be able to consistently beat the average return over time. This is why ultra-successful investor Warren Buffet recommends choosing diversified, long-term investments instead of playing the market.
Money Is a Tangible Item in a Bank Vault
When you go to the bank, the teller doesn’t go into the vault to a section where your money sits in a little pile. In reality, your local bank actually has very little money in cash on hand at any given time. Your money is used by the bank for its own investments, and it uses the interest it earns to fund its business. It also pays you some of that interest as a thank you for letting them use your money.
If everyone tried to take their money out of the bank at once, the bank would run out of funds and have to close – as many did during the Great Depression. Luckily for the average customer, banks are now insured by the FDIC, so even in the unlikely event of a run on the bank, the government makes sure you’ll get back up to $250,000.
Money Can’t Buy Happiness
Actually, it depends on what you spend it on. Having a minimum threshold of financial security to keep from falling below the poverty line will greatly improve a person’s quality of life, reduce stress and boost overall health. Research has also shown that when money is spent on experiences like time with friends and family, travel or adventure, it actually can boost the spender’s happiness.
You can also buy happiness for yourself if you spend your money on others, whether buying a thoughtful gift or donating to charity. What doesn’t buy you happiness? Spending your money on lots of stuff to keep up with the Joneses.
Now that you know a little bit more about money and its effect on your life, be careful to treat it with respect and use it in ways that will make you truly happy.