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Seven Savings Myths: Busted!

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Americans have started doing it again with a vengeance. Saving, that is.

The US savings rate touched 5% in the 2nd quarter of 2009 and has been hovering steadily over 3% since then. While that's still a far cry from the double-digit savings rates we saw in decades past, it is a big improvement from the negative rates of personal savings we had at the start of this millennium. However, there are many savings myths still floating around out there. Here are 7 Savings Myths - Busted!

1. I can only save a little bit, so it's not worth it. Would you tell your child in the morning, "Mommy only has time for one hug - so I'm not to give you any?" Be loving with your money too. Every little bit really does count. According to Coinstar, Americans have $10 billion of loose change rolling around. Small bits really do add up. I met one couple that saved $7,000 in 6 months by depositing change and all bar-tending tips into a big, previously unused flower vase in their bedroom.

2. I'll START saving money when I make more money
. I hear this all the time - but it doesn't happen. I've met people who can save on incomes of $30k and who can NOT save on incomes of $300k. Once you are making a living wage it comes down to a mindset. It depends on how you value happiness today versus security tomorrow.

3. If I earned more money it would be EASIER to save
. Not always true. Lifestyle creep has an insidious tendency to kick in as you make more money. You wear a fancier suit and then you feel like you need fancier shoes, and then a fancier a car, and then a house....

4. I want to be a good parent, so I need to give to my kids now so they can have a better life. First, the money you save early on is the most valuable. But worse, you are teaching kids to be dependent. Boomerang kids are a huge issue. 75% of 18-24 year olds right now are getting some form of economic help from their parents and for 40% are getting $10,000 or more a year!

5. I can always get a loan if things go wrong
. Wrong. Lenders want to lend you money when you don't need it. Why? Because they are sure you can pay them back. The worst possible time to be approaching a lender is when you are in dire straights.

6. Saving is all about deprivation
. Nope, saving is all about spending. It's just spending that you'll do in the future. You are not saving up all that money to sleep on it - it's to spend during tough times, for enjoyment, and/or when you are retired. Read Your Money Or Your Life for more on this.

7. Saving means cutting out all the small fun stuff. Well start with the big stuff. Your home, car, kids, education, and health care will likely eat up 50% of your income. Look for savings there first.

What about you? Are you saving more or less than last year... and why/how?