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Misconceptions about managing your money, and what to know instead

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2 years ago

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Witthaya Prasongsin | Moment | Getty Images

Many U.S. adults are making financial decisions with a generally poor level of financial literacy, a new report finds. Part of the problem: People continue to believe common misconceptions about managing and investing their money.

The TIAA Institute-GFLEC Personal Finance Index gauges an individual’s knowledge of their personal finances. The index, which has been conducted annually since 2017, asks respondents questions about borrowing, saving, earning, investing and other money-related areas.

In the latest version, most people got the correct answers only about half the time. 

Comprehending risk consistently proves to be the most difficult concept for adults to grasp, said economist Annamaria Lusardi, who founded the Global Financial Literacy Excellence Center in 2011 and is a senior fellow at the Stanford Institute for Economic Policy Research. Yet, “when we’re trying to look at the basis of financial decision-making, a key question is the relationship between return and risk,” she said.

More from Your Money:

Here’s a look at more stories on how to manage, grow and protect your money for the years ahead.

Here are the facts behind three common misconceptions about investing and managing finances that stump many Americans: 

1. Diversification

MISCONCEPTION: Investing in a single company’s stock usually provides a safer return than a stock mutual fund or exchange-traded fund.

FACT: Investing in one stock is like putting all your eggs in one basket. It exposes your savings to significant loss if the company is in trouble. 

Many mutual funds and exchange-traded funds — especially ones that track a broad market index like the S&P 500 — hedge this risk through diversification, by buying the stock of many different companies.

When it comes to your retirement savings, target-date funds can be another smart option.

“You don’t have to be an investment guru, you can always start with the target-date fund that’s in most retirement plans to get you in the game for a young person,” said Paul Yakoboski, a senior economist with the TIAA Institute.  

Target-date funds have become the most popular investments in workplace retirement plans, such as 401(k)s. As investors approach retirement, the fund’s mix of investments becomes more conservative, decreasing the portion of stocks and increasing the portion of bonds or cash.

2. Return and risk

MISCONCEPTION: Over time, stocks generally give the highest return with little risk when compared with savings accounts and bonds.

FACT: The U.S. stock market is considered to offer the highest investment returns over time, but there is a higher risk as stocks are more volatile than bond prices or cash in a savings account. 

Young couple managing finance and investment online, analyzing stock market trades with mobile app on laptop and smartphone.

D3sign | Moment | Getty Images

“An asset that brings a higher return also has a higher expected risk,” said Lusardi, who is also a member of the CNBC Global Financial Wellness Advisory Board. “People feel like, I can get a higher return with no risk … but basically, a higher return is always a reward for higher risk.”

Investors with a longer timeline toward their goal often have greater opportunities to weather that risk. But if you have a short-term goal, experts typically advise keeping the money out of the market.

For savers and short-term investors looking for a steady return, high-yield savings accounts can be an attractive option, with top interest rates currently hovering between 4% and 5%, according to Bankrate. There’s almost no risk to money in federally insured deposit accounts, unlike investments that are subject to the daily changes in the stock, which can result in much higher risk. 

3. Compound interest

MISCONCEPTION: If you had $100 in a savings account and the interest rate was 4% a year, you’d have $104 after 5 years if you left the money to grow.

FACT: A $100 deposit left in a savings account earning an interest rate of 4% per year over 5 years would total $121.67 with compound interest.

Compound interest can make your savings grow faster since you’re earning interest on the original amount of money deposited plus the interest earned. Check out the Securities and Exchange Commission’s compound interest calculator to calculate the interest you’re earning on your savings. 

Compounding can be one of the greatest gifts for savers and investors, many financial advisors say. You’re not necessarily rewarded for complexity when it comes to your portfolio, said certified financial planner Preston Cherry, a member of the CNBC FA Council and the founder of Concurrent Financial Planning in Green Bay, Wisconsin.

“You’re rewarded for commitment, consistency, and compounding,” he said.

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$20,000 Caution Bond Requirement for US Visa Applications imposed on 50 Countries

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7 days ago

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August 8, 2026

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The United States Department of State has officially implemented a revised visa policy introducing a mandatory posting requirement for caution payments of up to $20,000 on select foreign travel applications. Under the updated regulatory framework, consular officials are authorized to require temporary nonimmigrant visa applicants from targeted foreign countries to post a refundable financial bond of $20,000 as a condition for visa issuance. The policy mechanism is designed to address diplomatic concerns regarding high overstay rates among temporary visitor, business, and educational visa categories.

The caution bond pilot program applies selectively to foreign nationals from designated countries whose diplomatic entities record historical visa overstay rates exceeding established federal thresholds. Under administrative guidelines published by the State Department, the full financial deposit is posted directly to a dedicated federal escrow account prior to final visa issuance. The entire caution payment is automatically refunded to the applicant upon verified proof of timely departure from the United States in strict compliance with the authorized duration of stay. Conversely, failure to depart within the legal timeframe results in full forfeiture of the posted financial bond to the United States government.

Diplomatic representatives and travel policy experts have expressed varying perspectives regarding the operational implementation of the caution bond system. Administration officials emphasize that the measure serves as an effective, market-based incentive to enforce international travel compliance and preserve domestic immigration security standards. However, international trade organizations and foreign diplomatic missions have raised concerns regarding the financial burden imposed on legitimate business travelers, foreign students, and commercial partners from developing nations.

The United States finalized the rule to make the temporary visa bond program permanent, taking effect on August 3, 2026. The updated permanent regulation replaces the prior 12-month pilot, eliminates the lowest $5,000 tier, and raises the maximum required bond amount to $20,000 for specific B-1/B-2 business and tourist visa applicants.

Here is the list of the 50 countries on the list as o August 3, 2026

African Nations (31 Countries)

  • Algeria
  • Angola
  • Benin
  • Botswana
  • Burundi
  • Cabo Verde (Cape Verde)
  • Central African Republic
  • Côte d’Ivoire (Ivory Coast)
  • Djibouti
  • Ethiopia
  • Gabon
  • The Gambia
  • Ghana
  • Guinea
  • Guinea-Bissau
  • Lesotho
  • Malawi
  • Mauritania
  • Mauritius
  • Mozambique
  • Namibia
  • Nigeria
  • São Tomé and Príncipe
  • Senegal
  • Seychelles
  • Tanzania
  • Togo
  • Tunisia
  • Uganda
  • Zambia
  • Zimbabwe

Asian & Eastern European Nations (11 Countries)

  • Bangladesh
  • Bhutan
  • Cambodia
  • Georgia
  • Kyrgyzstan
  • Mongolia
  • Nepal
  • Papua New Guinea
  • Tajikistan
  • Turkmenistan
  • Uzbekistan

Caribbean & Latin American Nations (5 Countries)

  • Antigua and Barbuda
  • Cuba
  • Dominica
  • Grenada
  • Venezuela

Oceanian Nations (3 Countries)

  • Fiji
  • Tonga
  • Vanuatu

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Personal Finance

Next-Generation Retirement Planning: Managing Longevity Risk and Variable Income Streams

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1 week ago

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August 7, 2026

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Retirement planning strategies are evolving in 2026 to address increased life expectancies, shifting dynamic market conditions, and the transition away from traditional defined-benefit pensions. Individual investors and financial advisors are abandoning rigid retirement models in favor of flexible, multi-asset strategies designed to mitigate longevity risk and preserve purchasing power over multi-decade retirement horizons.

Mitigating Longevity Risk with Dynamic Asset Allocation
As average life expectancies extend past eighty-five years, one of the primary financial risks facing retirees is outliving their accumulated wealth. Traditional fixed income allocations—such as the standard 60/40 equity-to-bond portfolio—are being reevaluated to ensure portfolios generate sufficient capital growth alongside reliable income.

Financial planners recommend maintaining a meaningful equity allocation throughout retirement to offset long-term inflation erosion. High-dividend equity funds, global real estate investment trusts (REITs), and inflation-indexed Treasuries are combined to create diversified portfolios that deliver both growth and income stability.

The Transition to Dynamic Withdrawal Strategies
The classic “4% safe withdrawal rule” is increasingly replaced by dynamic withdrawal strategies that adapt annually based on market performance. Under a dynamic withdrawal framework, retirees adjust their annual distribution rates within pre-set caps and floors:
– Market Upside: During strong market returns, retirees can increase discretionary spending or fund family legacy gifts.
– Market Downturns: During market pullbacks, spending distributions are temporarily reduced to prevent sequence-of-returns risk and preserve core investment principal.

Guaranteed Lifetime Income Options and Deferred Annuities
To establish a guaranteed baseline for essential living expenses, individuals are incorporating modern fixed-indexed and deferred longevity annuities into their broader retirement architectures. Modern annuity structures offer competitive return caps, transparent fee schedules, and inflation-adjustment options.

By funding essential expenses—such as housing, healthcare, and insurance—with guaranteed income streams from Social Security, pensions, and annuities, retirees can manage discretionary investment portfolios with greater flexibility and lower emotional stress during market volatility.

Actionable Steps for Future Retirees
1. Calculate Baseline Retirement Expenses: Determine fixed living costs and map guaranteed income sources to cover essential expenditures.
2. Adopt Flexible Withdrawal Rules: Implement dynamic spending rules to protect investment principal against market downturns.
3. Incorporate Inflation-Protected Assets: Maintain exposure to dividend-growing equities and inflation-indexed bonds to safeguard long-term purchasing power.

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Personal Finance

Building Generational Wealth: Family Governance, Estate Tax Optimization, and Asset Protection

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2 weeks ago

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August 1, 2026

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As the largest intergenerational transfer of wealth in history accelerates, high-net-worth families, entrepreneurs, and individual investors are placing heightened emphasis on comprehensive estate planning, family governance, and asset protection. Preserving capital across generations requires a balanced approach combining tax-efficient legal structures with open family communication and financial literacy education.

Optimizing Estate Tax Exemptions and Trust Structures
With potential modifications to federal estate tax exemption thresholds on the horizon, proactive estate planning is essential for high-net-worth households. Estate planning attorneys and wealth advisors are establishing multi-generational trust structures to transfer wealth efficiently while minimizing estate and gift tax exposure.

Popular structural strategies include:
– Irrevocable Life Insurance Trusts (ILITs): Utilizing life insurance proceeds to provide liquidity for estate tax obligations without expanding the taxable estate.
– Grantor Retained Annuity Trusts (GRATs): Transferring rapidly appreciating assets to beneficiaries with minimal gift tax consequences.
– Dynasty Trusts: Preserving wealth across multiple generations while providing long-term asset protection from creditor claims and legal liabilities.

Establishing Family Governance and Financial Education
Legal and financial structures alone cannot guarantee long-term wealth preservation without effective family governance. Financial advisors report that a significant percentage of multi-generational wealth dissipation stems from lack of communication and inadequate financial preparation among heir generations.

Families are establishing formal family governance frameworks, including periodic family meetings, written mission statements, and structured philanthropic foundations. Involving younger family members in charitable grant-making and investment discussions fosters financial stewardship and prepares heirs to manage family assets responsibly.

Digital Asset Custody and Legacy Planning
In today’s modern economy, estate planning must extend beyond physical real estate and traditional brokerage accounts to encompass digital assets. Comprehensive estate plans now include detailed inventories and legal access protocols for corporate domain names, intellectual property, digital media rights, and cryptocurrency holdings.

Fiduciaries and estate executors should be provided with secure, encrypted access mechanisms and clear legal authority to manage and transfer digital holdings in accordance with the owner’s estate directions.

Practical Steps for Legacy Planning
1. Review and Update Estate Documents: Ensure wills, revocable trusts, and power-of-attorney designations accurately reflect current family structures.
2. Establish Structured Trusts: Utilize irrevocable trusts to protect assets from creditors and minimize future estate tax liabilities.
3. Create a Digital Estate Inventory: Document access protocols and legal permissions for all online accounts, intellectual property, and digital assets.

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