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Financial advice is all over social media, but be careful who you listen to.
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Move over, financial advisors. Social media platforms have become the first place younger generations turn to when looking for personal finance advice. Among millennials and Generation Z, 79% have gotten financial advice from social media, according to a survey by Forbes Advisor.
They seek out advice on a broad range of financial topics. Investing in stocks and bonds was the most common choice, with 57% of young adults saying they used social media to learn about this. Personal budgeting (51%), passive income (49%), reducing debt (40%), and building or improving credit (37%) rounded out the top five topics.
This may sound like a recipe for disaster. That’s not always true, but there are some definite dangers to learning about money on social media.
Can you trust financial advice from social media?
The financial advice on social media runs the gamut in terms of quality. Some of it’s excellent. Some of it’s okay, or could be useful for certain viewers, but not everyone. And some of it’s just flat-out terrible, or simply a scam designed to make money for the content creator.
There are a few reasons why it’s risky to trust financial advice on social media:
Anyone can be a “finfluencer.” There’s no vetting process, and it’s easy for people on social media to lie about their qualifications or financial success. Since there’s no barrier to entry, many of the people giving out advice really aren’t qualified to do so.Content creators don’t always have your best interests at heart. Some are looking to make money at their audience’s expense. They may do this with outright scams, such as crypto pump and dumps. Others promote dubious financial products, like the many life insurance agents offering policies with huge fees.Sensationalist content brings in the views. This often leads to inaccurate information making the rounds, like last year’s warning on TikTok that cash was going away.
However, it’s not all bad. There are plenty of people who provide useful financial advice. And there are some advantages to learning about money on social media.
One of the biggest benefits is that you can get financial advice in a format you’re comfortable with. If you like using Reddit, you can go to the subreddit for the financial topic you’re interested in, such as investing, credit cards, or personal finance in general. If you’re a fan of TikTok, you can follow reputable financial influencers there.
Social media is also giving more people access to financial information. Among those surveyed by Forbes, 78% said they believe they have more access to financial advice than they would have in the past due to their identity (race, gender, or income). And 76% of millennials and Gen Z believe social media has made it less taboo to talk about money.
How to stay safe when using social media for financial advice
There’s nothing wrong with using social media to learn about finances, if that’s what works for you. But you need to know how to do this safely so you don’t lose money because of lousy advice.
Here’s the most important thing to remember: Research advice and make sure you fully understand it before you follow it. Never follow advice just because one influencer says it’s a good idea.
For example, if you see a video recommending a specific investment, look it up yourself. See if any experts have talked about it, and evaluate the pros and cons of that investment. Make an informed decision based on your own research.
Also, do your homework on the person providing the advice. Google them to check if they have credentials, such as awards, education, or any sort of background in personal finance. This is a great way to find quality financial influencers to follow.
Even if opinions are divided on using social media for financial advice, people are doing it, and it’s almost certainly going to become more and more common. The key is knowing how to separate the good advice from the bad. If you do that by double and triple checking information, then social media could be a useful tool for getting better with money.
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