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Social media has become an integral part of many Americans’ lives, especially among younger generations. It’s not only changed the way we connect — it’s altered the way we seek advice, especially when it comes to money.
Almost 80% of Gen Z learns about personal finance from TikTok and YouTube, though TikTok is the most popular platform for money education.
Despite the platform’s popularity as a source of financial education, TikTok likely isn’t the best place to learn about money. Here’s why.
Why TikTok may not be the best place for financial advice
TikTok is a social media platform that’s immensely popular among younger generations. What makes TikTok unique is its format, which allows users to create short videos on a wide range of topics.
Many people, including financial experts, have used this platform to share financial advice in a format that is easily digestible and entertaining. Many Gen Z users follow these “finfluencers,” who provide tips and real-life examples that resonate with younger audiences.
The appeal of TikTok lies in its ability to present information in a visually engaging and concise manner. Users can follow creators specializing in finance or seek out specific hashtags related to financial advice. This allows individuals to curate their feeds and receive tailored content that aligns with their financial interests.
However, there is a danger to using TikTok for financial advice.
- Limited context: TikTok’s format can sometimes lead to oversimplification of complex financial concepts. Without sufficient context and in-depth explanations, it’s easy to misunderstand or misinterpret advice.
- Lack of credibility: For one, anyone can bill themself as a financial expert. Specific credentials, like Certified Financial Planner, require education, tests, and adhering to ethics standards. Many popular titles used on TikTok, like “money expert” or “budget specialist,” have no such requirements.
- Bias: Many TikTok users share their personal experiences. While these stories can be valuable, they may not apply to everyone.
- Misinformation and scams: Like any social media platform, TikTok is not immune to misinformation or scams. Some creators may provide incorrect information or mislead to earn a profit.
While you can find helpful information and legitimate financial experts on TikTok, it can be challenging to separate the good from the bad.
Social media can hurt your finances
Social media as a whole can be damaging to your finances, even if you aren’t seeking out financial advice.
Nearly half of social media users say they’ve made an impulse buy based on something they saw on social media, a Bankrate survey found.
Social media platforms are filled with targeted advertisements and influencers promoting products. The constant barrage of ads and the fear of missing out (FOMO) can tempt someone into impulse buying. Falling prey to these impulses can negatively impact your budget and savings goals.
Social media often presents a highlight reel of someone’s life, showing extravagant vacations, luxury purchases, and picture-perfect routines.
Constant exposure to this curated content can lead to feelings of inadequacy, which may prompt you to overspend or go into debt in an attempt to keep up with unrealistic standards. Gen Z spent an average of $844 on impulse purchases, according to the same survey.
To protect your finances while using social media:
- Set boundaries: Limit your time on social media and take regular breaks to reduce constant exposure to materialism.
- Focus on your goals: Stay grounded in your financial priorities and goals. Avoid comparing yourself to others, and remember that everyone’s financial journey is unique.
- Practice critical thinking: Be discerning when consuming financial content on social media. Verify the credibility of sources and cross-reference information with reliable, reputable resources.
- Build financial literacy: Educate yourself about personal finance through trusted sources.
How to boost your finances offline
TikTok can be a great starting point to learn more about personal finance, but you shouldn’t rely on it as a single source of truth. Taking just a few basic steps can help put you on the path to financial success.
Build a budget
One of the first things that anyone should do to set themselves up for financial success is to build a good budget. Start by looking at how much money you make each month. Then, allocate your money to different spending categories, including rent, bills, and groceries. Make sure that you’re not spending more than you earn.
Once you build the budget, keep track of your spending over time. You can try a budgeting app or an old-school spreadsheet.
Save where you can
When you’re creating your budget, include a line item for saving. Not having any savings leaves you vulnerable to an unexpected bill.
Try to set aside some money every month. Even $10 or $20 a month can make a difference, though the more you can save, the better.
Aim to build an emergency fund that covers a few months’ expenses. After that, you can start saving for other goals.
Consider placing your money in an account that earns interest, like a high-yield savings account.
Avoid impulse buying
Impulse purchases are a major budget killer. While it’s okay to go out and have fun, you should limit impulse spending as much as possible.
This can be difficult. But before making a purchase, step back and take time to decide if it’s worth it or not. Consider using a waiting period (like 24 hours) before purchasing.
You also want to unsubscribe or unfollow accounts that tempt you with products or promotions.
Plan for larger purchases
Just because you’re limiting impulse spending doesn’t mean you can’t buy expensive things. You just need to plan for your large purchases.
For example, if you know that you want to go on a trip next year, make a plan now to set aside a certain amount each month until you reach your goal.
Most banks will let you open multiple savings accounts, each dedicated to a specific goal. With a budget and automatic transfers, you can make saving much easier.
The bottom line
Social media is popular for a reason. People like to see what other people are doing and to stay connected with their friends. You may also want to use social media to learn something new — including about your money.
But it’s important to be aware. Developing a solid knowledge of personal finance — outside of social media — will help you to make better decisions. Use these tips to set yourself up for financial success and do your best to resist the temptation to overspend.
Opinions expressed are author’s alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.