14 Personal Finance Facts and Myths: Do You Know the Difference?

When it comes to things like the cost of raising a child or how much to spend on housing, do you know your stuff? In a recent issue of AARP The Magazine, personal finance expert George Mannes provides a wealth of eye-opening information designed to help Americans get a handle on their finances. In an interview with Cheapism, Mannes expanded on his list of insights, presented in the form of a "Family Financial Exam." Don't worry -- it's true or false.

True. Middle-income parents spend an average of $37,000 per child on childcare and school before that child ever heads off to college, according to Mannes. In 1960, the amount was a mere $4,000 per child in today's dollars. Times certainly have changed.

True. Roughly 29 percent of women in dual-income marriages make more money than their spouses. That's up from about 16 percent in 1981.

True. Most retirement savings programs in the U.S., such as 401(k)s and traditional IRAs, allow tax-free contributions, and the money is taxed when you take it out during retirement. Money contributed to a Roth IRA, however, is taxed now, instead of when the funds are withdrawn. "If you're just starting out and not making a huge salary, the tax rate you pay now is going to be much lower than the tax rate you pay at retirement," Mannes says. "It makes more sense to take the tax hit now (by opting for a Roth IRA), when it won't be huge, than later when you will be in a higher tax bracket."

False. In a survey, 74 percent of adult children said it was important, compared with 52 percent of parents. "This finding reflects the fact that, for many of us, it's unpleasant to talk about elder care if you're the one who's going to be the elder," Mannes says. "We all like to think of ourselves as independent and vital, and it's no fun to think about yourself as being dependent on others. … This is acknowledging that your traditional roles -- the caretaker parent and the child who can't get along without that parent's help -- might be reversed."

True. Many employers offer 401(k) programs that include employer-provided matches of your contributions up to a certain percentage of your pay. "At the very least, what you want to do is get the complete match that many employers give," Mannes says. "A typical example is an employer will match 50 cents of each dollar up to 6 percent. That's an instant 50 percent return on your money."

True. As frustrating as this may be for the other siblings, this particular factoid is true, according to Mannes. Eldest children are also more likely to work in management when they grow up (perhaps thanks to all those years of managing their younger siblings).

False. This is one of the biggest money myths. It's not always wiser to buy a home. A lot depends on your current phase of life and your career. Mannes says it's important to ask questions such as: How much does it cost to rent where you want to live, versus how much it would cost to own? "The other key thing is: If you are young, mobility may be more important," Mannes says. "Homes are not liquid. If you get a great job opportunity on the other side of the country for that fantastic career you're embarking on, it might be a challenge for you to sell a home or wait around to sell it, and you may have to sell it at a loss."

False. As a general rule, most people shouldn't try to pick individual stocks to fund their retirement, says Mannes. "Much research has shown that even experts have a tough time beating the market consistently year after year. The percentage of investment professionals who beat the market gets smaller and smaller as the years go by," he says. "If experts have a tough time doing it and they're working on it 12 hours a day, five days a week, with lots of computing power and research assistants, then it's not a good idea for you." It's a far better idea to put your money in index funds, balanced funds, or a target-retirement-date fund.

False. "You're going to have to pay property taxes, you will probably have to pay mortgage insurance, and you're going to have to set aside a certain amount of money for the things that are going to go wrong," Mannes says. "You don't know what they are, but things will go wrong." Bottom line: When contemplating whether or not you can afford a home, you need to be prepared financially for far more than just a mortgage payment.

False. Far fewer couples, only about 37 percent, share financial decision-making equally. Whether or not this approach to money matters has an impact on the marriage was not revealed.

False. About 53 percent provide money for school, and 23 percent contribute money toward their grandkids' health and dental expenses. (Thanks, Grandma and Grandpa.)

True. With the average interest rate on credit cards hovering between 14 and 15 percent, carrying a balance month to month can cost a hefty sum over the course of a year, Mannes says. "If you pay off that debt, you don't have to keep paying interest on that debt. That's money in your pocket that wouldn't be in your pocket at the end of the year. That's a 14 percent return guaranteed." And high interest rates aren't the only thing to be wary of with credit cards.

True. The average is about $367,000. Meanwhile, families at the median level of wealth in the U.S. report average inheritance of around $16,000.

True. Low-income families spend about 41 percent, and high-income families spend closer to 30 percent.