Rosalind Evans
Social media has become a hub for financial advice, especially on TikTok. While it may seem convenient, not all the advice you find online is sound. According to a report by Edelman Financial Engines, 27% of adults have taken bad financial advice from TikTok and other social platforms. The consequences can range from minor mistakes to severe financial missteps.
TikTok and Financial Missteps
TikTok, a platform filled with bite-sized videos, is often home to questionable financial advice. The wrong advice can seem endless, from suggesting putting your toddler on the payroll to advising that you claim your car as a business expense. #FinTok is extremely popular despite these risks, particularly with younger users. Generation Z is especially drawn to this content, seeking money tips and tricks online.
“It’s hard to discern what’s good advice from what’s not,” says Jean Chatzky, personal finance expert and CEO of HerMoney.com. She emphasizes, “If it sounds amazing, it’s probably too amazing.”
Gen Z: The Most Vulnerable to Finfluencers
A growing concern is how susceptible Gen Z is to financial influencers, or “finfluencers,” on platforms like TikTok, YouTube, and Instagram. According to the CFA Institute, Gen Z is five times more likely than older generations to rely on social media for financial advice. This lack of access to traditional financial advisors makes them more vulnerable to bad advice from these platforms.
“While some social media financial tips may encourage better savings habits,” says Isabel Barrow, director of financial planning at Edelman Financial Engines, “you have to take everything you hear and see on social media with many grains of salt.”
The Danger of False Promises
With roughly 20% of people admitting to falling for misleading financial content more than once, it’s clear the reach of false promises on social media is significant. These platforms often promote content that simplifies complex financial strategies, making them seem like quick fixes. However, these tips can have serious consequences, especially regarding important matters like taxes or investments.
Barrow says, “It may be good advice for someone, but it is not a one-size-fits-all thing.”
Vetting Financial Advice Online
Given the growing number of people turning to social media for financial guidance, it’s more important than ever to vet the sources of this information properly. While traditional financial advisors come with credentials and certifications, the background of a social media influencer may not be so clear.
Chatzky advises, “Check out who you are listening to, what their background is, and whether they actually have the credentials to lead you down the road you are about to follow.”
To ensure the credibility of financial professionals, consumers can check their background on several trusted websites. Certified financial planners should visit the CFP Board’s website, and brokers or brokerage firms should check out the Financial Industry Regulatory Authority (FINRA) website. Investment advisors can be verified through the U.S. Securities and Exchange Commission’s site.
Be Cautious, Be Smart
As social media grows as a source of financial advice, it’s crucial to be cautious and do your vetting. Not all tips are created equal, and what may work for one person could lead to problems for another. Always cross-check financial advice, especially if it sounds too good.
Remember, the best financial decisions are the ones made with verified and well-researched information.
