Social Media’s Impact on Personal Finance for Millennials and Gen Z

Younger generations, especially millennials and Gen Z, are increasingly using social media for financial activities like making and receiving payments, crowdfunding, shopping, and learning about finance. While social media offers convenience and a sense of community for these financial tools, it also brings risks like fraud and misinformation.

Millennials (born 1981-1996) and Generation Z (born 1997-2012) have grown up with digital technology, making them the first “digitally native” generations. They use social media more frequently than older groups, not only to connect with people but also for financial activities. This article explores how social media and personal finance overlap in four key areas: peer-to-peer (P2P) payments, crowdfunding, social commerce, and financial education.

P2P Payments as a Social Experience

As digital natives, millennials and Gen Z are more likely than older generations to use P2P apps to transfer money. These apps allow users to split bills, pay back friends, cover entertainment costs, or donate to charity. A 2022 survey shows that 85% of people ages 18–44 have used a P2P app, compared to 64% of those 45–59, and 38% of people 60 and older. Younger users also use these apps more often, with 35% of people aged 18–29 using them weekly. The social side of Venmo appeals especially to younger users, while apps like PayPal and Zelle, which don’t have social features, are more evenly used across all age groups.

Venmo, founded in 2009 and acquired by PayPal in 2013, blends social media with P2P payments, allowing users to connect and share financial interactions. By default, Venmo displays a public feed of transactions, though amounts are hidden from non-parties. Users can comment or like these transaction posts, making the experience more social.

Other social media companies like Meta and Snapchat have tried to add payment features to their platforms but with less success. X (formerly Twitter) is also looking to offer P2P services by securing licenses for money transmission and processing payments.

Crowdfunding

Crowdfunding, or raising money from many donors, is another area where personal finance meets social media for millennials and Gen Z. Social media has accelerated crowdfunding by helping fundraisers reach a larger audience through posts, hashtags, and groups. Well-known examples include the #GivingTuesday campaign and the ALS Ice Bucket Challenge, both of which used social media for charitable crowdfunding.

Today, crowdfunding is very common. According to a 2020 survey by Indiana University, 56% of people who donate to charity do so through crowdfunding or social media. Crowdfunding is especially popular with younger donors, whose average age is 44, compared to 50 for traditional donors. Millennials and Gen Z often use crowdfunding for personal expenses like medical bills, rent, or groceries, especially among marginalized groups. Crowdfunding platforms like GoFundMe are popular, but younger users are increasingly using P2P apps and social media platforms for these purposes.

Aside from charitable causes, millennials and Gen Z also use crowdfunding to earn money. Patreon, a platform for content creators to raise money from fans, allows artists, musicians, and writers to offer exclusive content for a fee. The majority of Patreon users are aged 18-34.

Social Commerce

Social commerce, where customers can shop directly on social media platforms, is growing in popularity among younger generations. Unlike traditional e-commerce, which redirects users to external websites, social commerce allows users to purchase products without leaving the app. Examples include Facebook Marketplace, Instagram Shopping, and TikTok Shop.

According to surveys, about half of millennial and Gen Z users made purchases on social media in 2022. Many younger consumers also believe that social media platforms are better for learning about new products than traditional online searches. Social commerce offers a more engaging shopping experience, where users can see reviews, interact with social media influencers, and get feedback from friends or family before making purchases. Popular hashtags like #TikTokMadeMeBuyIt have driven global engagement with product reviews.

The convenience of social commerce is another reason for its appeal. Some platforms allow digital wallets like Apple Pay, making checkout easier and more secure. However, a 2022 survey shows that trust issues around payment information remain a barrier for some consumers.

Financial Education on Social Media

Millennials and Gen Z are turning to social media for financial advice. A 2021 survey found that 39% of consumers aged 22-64 get financial advice from online sources like blogs or social media. Among Gen Z, social media is the most popular source, with YouTube, TikTok, and Instagram being the top platforms for financial education.

Finfluencers, or social media creators who offer financial advice, are becoming influential. Popular hashtags like #GenZFinance and #FinTok feature content on topics such as budgeting, investing, and saving for retirement. Methods like “cash stuffing,” where users budget their spending with cash, are gaining popularity among younger generations. Despite their digital savvy, many Gen Z individuals prefer cash to help them manage their finances.

Risks for Consumers

Although these new tools offer many benefits, they also come with risks. According to the Federal Trade Commission, fraud involving payment apps has been rising since 2019, with total losses increasing from $50 million in 2019 to $164 million in 2022. Scams, including romance and phishing schemes, may become more common as P2P payments become integrated into social media platforms.

Social commerce can also be risky, as consumers may receive goods that don’t match their descriptions, or experience difficulties with returns. Misinformation about financial products from finfluencers is another concern, as not all advice on social media is accurate or unbiased.

Conclusion

Millennials and Gen Z are increasingly using social media for personal finance activities like P2P payments, crowdfunding, shopping, and financial education. While these tools offer convenience and community, they also present risks such as fraud and misinformation. Regulators and financial service providers should keep an eye on these trends to protect consumers.

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