The Influence of Social Media on Personal Finance

Nearly eight out of ten millennials and Gen Z members have sought financial advice from social media platforms like TikTok and Instagram. In fact, half of them claim they’ve made money thanks to the financial tips they found there. This data comes from a survey by Forbes Advisor, conducted through the market research firm Prolific.

This may help explain why the American Banking Association reports that 89% of banks are actively engaging on social media. Debt.com even sponsors the annual FinTok Awards, where the public votes for the best finance content creators on TikTok.

It’s understandable why these platforms are popular, considering only one in three young adults receives practical financial advice from their parents. In a survey of 1,000 young adults (ages 18-26) by The Zebra, 39% said they learned their spending habits from their parents, while 38% said their saving habits were influenced by them. A positive finding was that 29% reported learning from their parents’ financial mistakes.

Negative Impact of Social Media

However, for every success story of someone improving their finances through social media, there’s more evidence showing it can cause harm. Many banks on social media post articles discussing issues like overspending, trying to keep up with others (often referred to as FOMO), and losing focus at work, which can cost both individuals and their employers.

A study by Qualtrics for Intuit’s Credit Karma found that over 40% of millennials and Gen Z feel insecure about their financial situation, a condition sometimes called “money dysmorphia.” Courtney Alev, a financial advocate at Credit Karma, says, “People are comparing their finances to their peers, social media influencers, and even celebrities, which leads to feelings of inadequacy. This gap between perception and reality can stop people from taking steps toward their financial goals.”

While social media is often criticized for harming self-esteem, it also offers positives, like new job opportunities and access to resources for starting a business or finding a profitable side hustle.

Getting Practical Financial Education

Social media has given rise to personal finance influencers, often called “finfluencers,” who offer financial tips on every platform. Some of them post hundreds of videos, but more content doesn’t always mean better advice. It’s important to know the difference between good advice and misleading information, as blindly following bad advice can lead to financial trouble.

Social media can be a useful tool for people who don’t have access to formal financial education. But relying solely on content creators comes with risks. Popular trends like “quiet luxury,” “loud budgeting,” and “cash stuffing” might work in the short term but can backfire later, especially when tax time comes around.

As people’s financial decisions become more personalized, so do the ways they invest and save. Some social media users openly share their spending and saving habits, not necessarily to teach others, but because it’s becoming more common to do so. In some cases, others can learn valuable lessons from their mistakes, even if that wasn’t the intention.

One thing is clear: as Gen Z increasingly turns to social media for financial advice, banks and financial professionals must adapt. Russell Davis, executive vice president of member engagement at the American Bankers Association, says, “Social media is a vital marketing channel that helps banks connect with customers where they spend their time. When used properly, social media allows banks to build relationships and strengthen their brand while offering a strong return on investment.”

The days of listening to financial giants like EF Hutton are over. Even well-known financial experts like Robert Kiyosaki, Warren Buffett, Suze Orman, Clark Howard, and Dave Ramsey are seeing their influence wane as TikTok’s finfluencers gain more attention with their easy access to information.

Social Media Influencers vs. Financial Professionals

While social media can offer helpful advice, it’s also important to work with a financial professional. These experts are educated, licensed, and regulated, and they are required to act in the best interest of their clients.

In contrast, social media influencers don’t have the same obligations.

To make informed financial decisions, it’s wise to consider both free resources and professional guidance. A balanced approach combines current trends with trusted financial advice, ensuring better outcomes in the long run.

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