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Nearly eight in 10 millennials and members of Gen Z have gotten financial advice from social media, such as TikTok or Instagram. 50% claim they can direct attribute money they’ve made to the financial tips gathered there. That’s according to a recent survey commissioned by Forbes Advisor and conducted by market research company Prolific.
That probably a contributing factor for why the American Banking Association found 89% of banks actively engage across social platforms. Debt.com even sponsors an annual FinTok awards, a publicly-driven vote for the best finance content creators on TikTok.
It’s hard to fault them when only one in three young adults gets useable financial advice from their parents. Of the 1000 young adults (age 18-26) The Zebra surveyed, 39% said the learned their spending and 38% their saving habits from their parents. On a good note, 29% say they learned from their parents’ mistakes with money.
Negative Impact of Social Media
Unfortunately, for every story of someone social media has helped with their money, we have far more evidence to show it’s causing distress. All those banking sites on social media? Every single one has articles going back years, talking about spending too much, keeping up with the Jones’, now more commonly referred to as FOMO, and, of course, costing yourself and your employer money because you’re distracted.
A Qualtrics study for Intuit’s Credit Karma indicates just over 40% of millennials and Gen Z experience insecurity about their financial standing (i.e., money dysmorphia).
Courtney Alev, a consumer financial advocate at Credit Karma, comments, “…People are examining their finances and comparing themselves to their peers, people on social media, and even celebrities, which [brings up] feelings of inadequacy. This distortion between perception and reality can prevent people from taking steps towards achieving their financial goals.”
Social media’s well-earned reputation for negatively affecting self esteem can be balanced by the positives, like job opportunities — even positions that didn’t exist a few years ago, and access to entrepreneurial tools, whether they want to start their own business or just find a lucrative side-hustle.
Finding Functional Financial Education
Personal finance influencers or ‘finfluencers’ as they’re now called, can be found on every social platform. Some of them have hundreds of videos with tips and tricks. But quantity does not always equal quality. Discerning the difference between useful tips and monetary misinformation is crucial lest users be led down a rosy path to disaster.
Yes, social media can provide an accessible starting point for those without solid sources of financial education. The potential drawbacks of relying solely on content creators for financial education come with other problems. Microtrends like quiet luxury, loud budgeting, and cash stuffing may work for the short term but yield painful lessons down the road. Especially come tax time.
As spending becomes personalized, so does investing and saving. Along with influencers sharing how to make and spend money, a new subset of users is emerging. Where once your and your family’s finances were held close to the vest, it’s now popular for average users to share how they are spending, saving and budgeting. Not as a way to educate others, but just because it’s increasingly the norm.
And, honestly, someone’s misfortune can be a lesson to others in avoiding their mistakes, whether it was intended that way or not.
One thing is for certain, as Gen Z increasingly relies on social media for financial education, banking institutions and finance pros must evolve.
Russell Davis, the American Bankers Association’s executive vice president of member engagement, says, “Social media serves as an essential marketing channel that allows banks to connect with customers by meeting them where they are. When used effectively, social media helps banks humanize their brand and build relationships while offering a strong return on investment.”
No one is listening for what EF Hutton says anymore. Even celebrity finance gurus still in the public eye like Robert Kiyosaki, Warren Buffet, Suze Orman, Clark Howard and Dave Ramsey are dwindling in popularity as finfluencers on TikTok garner eyeballs with their accessibility.
Social Media Influencers vs. Financial Professionals
While you may find some valuable information on social media, it is important to also work with a financial professional. They are educated, licensed and regulated to make sure they know what they are doing. Further, they have a fiduciary responsibility — they must act in their client’s best interests, always.
Social media influencers aren’t subject to the same requirements.
Consider both perspectives for a balanced approach. Ignoring free information is just as foolish as disregarding professional expertise. Making informed decisions means using all the available resources, current trends, and reliable traditions.
This article was produced by Media Decision and syndicated by Wealth of Geeks.
