Today’s fantastic family finance article is:
- Many adults think being bumped into a higher tax bracket means they’ll pay a higher rate on all their income. Nope. They don't understand how progressive tax brackets work.
- Many adults think when they sell an investment, they pay tax on the full sale price. Nope. They don’t understand the concept of capital gains (or losses).
- Many adults think putting money in a 401(k) means earning tax-free income. Nope. They don’t understand tax deferral.
- Many adults think buying a house is always better than renting. Nope. They don’t understand how to do the cost-benefit analysis of buying versus renting.
- Many adults think getting a big tax refund is a good deal. Nope. They don’t understand they’ve given the government a free loan and the opportunity cost of doing so.
- Many adults think having “that thing” will make them happy. Nope. They don’t understand the hedonic treadmill phenomenon and what really drives sustained happiness.
Don’t let your kids become those adults. Read Trent’s article for clear, concise explanations of each misconception. Then sit down with your kids and help them get their basic money facts straight.