Restaurant service charges are compulsory while you have to be over the age of 30 to be enrolled in a pension scheme. These are just two examples of seemingly common money misconceptions uncovered by new research by voucher website VoucherCodesPro.
Yet over half of the people surveyed claimed they had “sound financial knowledge”.
Here are the biggest misconceptions and the reality.
Restaurant service charges
Over two-thirds of people thought it was compulsory to pay restaurant service charges if they are added to your bill. But while it’s good manners to offer a tip, particularly if the service has been good, it’s not compulsory.
And while you shouldn’t look for an excuse to not pay, similarly you shouldn’t pay or you should offer a smaller tip if you feel the service has been poor.
Just over half of the respondents thought it was compulsory to have life insurance. Now while this isn’t true at all, the reality is a lot more people should have it than actually do.
Life insurance is a vital piece of protection if you have dependants, such as children, and your family would struggle financially if you were to die. It doesn’t have to be expensive either; for example a 35-year-old male non-smoker in good health wanting £200,000 of cover that gradually decreases over a 20-year period would pay £7.19 a month with insurer Beagle Street.
Yet figures suggest as many as 60% of us don’t have life insurance. Not all of us need it, of course, but that’s still a very high number.
It can also be useful even if you’re older. A whole of life policy can help to pay things such as funeral costs as it pays out on death, no matter how long you live for.
Be wary of specialist over-50s life cover though. It’s often advertised on TV and in the papers by celebrities, but is an expensive way of providing a payout on death, particularly if you’re in good health and end up paying premiums for decades.
If you don’t have any dependants it’s almost certainly not worth having life cover.
Fewer than half of the people questioned thought that all adults in the UK needed to have at least one credit card. Of course, it’s not compulsory, although paying for things by credit card rather than debit card gives you an extra layer of protection.
That’s because Section 75 of the Consumer Credit Act protects credit card purchases and makes both the company you’re spending money with and the card company jointly liable if things go wrong.
You’re covered so long as the item costs between £100 and £30,000, yet you don’t have to pay the whole amount on your credit card. So even if you bought something costing £100 and paid only £1 of the cost using a credit card you would still be covered.
Of course, credit cards need to be used sensibly and you should pay off your spending in full each month. But if you’re disciplined enough to do that, you should perhaps consider taking advantage of rewards and cashback on your spending.
You could earn rewards points and/or cashback worth hundreds of pounds a year just by putting your everyday spending on your credit card. What’s more, most of them are free to use so long as you pay back your balance.
Nearly two-thirds of the people surveyed thought you have to be over 30 to qualify for a pension, whether workplace or private. That’s not the case at all.
In fact, the longer you leave saving for the future, whether it be in a pension or in another vehicle such as an Isa, the less money you’re likely have in retirement.
The government has introduced compulsory workplace pensions, which means that everyone over the age of 22 in full-time employment can put some money aside from their pay.
The sooner you start to save, the longer your money has to grow.
Finally, nearly a third of people believed they could only use their bank card at their own bank’s cashpoint and not at any other. That is absolutely not true as agreements between banks and building societies mean all free cashpoints are now open to pretty much any bank card.
So if you’re taking out large sums of cash because you fear you can’t use your card elsewhere, now’s the time to stop.