Elizabeth Murphy was highly commended, in the 16-17 age group in this year’s Young Financial Journalist competition. Her article explores the impact of social media influencers on financial education.
Personal finance social media is infiltrating young people's lives. Hundreds of financial ‘influencers’ flood the ‘for you’ page, racking up millions of likes by spreading dubious investment information from unverified sources.
Due to Gen-Z’s desperation for financial advice, thousands of young people fall prey to misinformation or end up getting lured into the promise of becoming millionaires. However, they only to end up with expensive sign-up programmes for non-beneficial financial courses.
Who can be a financial influencer?
The simple answer is anyone. Any person with access to a social media account could become a source of financial advice. Take Kim Kardashian as an example – in June 2021, she came under fire for promoting an untested cryptocurrency, Ethereum max, to her 250 million Instagram followers.
The financial conduct authority (FCA) criticized her since numerous vulnerable people lost money. Her promotion caused a spike in the price of Ethereum max, followed by a dramatic reduction in price of almost 97%. On top of that, 14% of the sales at that time were using credit cards, causing numerous people to lose a lot of money.
The Kardashian is not the only one to promote unregulated cryptos via social media, financial TikTok, commonly known as #fintok, has become a cesspool of scammers utilizing the accessibility of the platform to influence people into using unreliable money hacks and invest in unregulated cryptocurrencies like Ethereum max.
The cons of using social media for financial education
Another major fallback of #fintok is contradiction. Curtis Ray, a popular financial influencer on TikTok, gained 26 million views on his TikTok explaining that you should spend as little as possible on a mortgage. Most professionals would say this is not a bad idea.
However, there are much more to mortgages than meets the eye, including emotional considerations as people tend to stray away from debt due to its negative attributes. Even though Mr Ray’s advice has plausibility, the reason he is telling people to pay less on their mortgage is to invest in his product with the remaining savings.
On the contrary, millennial babossbabe claims people should pay more on their mortgage by increase the number of payments to decrease interest rates. With this, there are many positives and negatives, but it depends on the person’s financial position and does not work for every single person.
The pros of using social media for financial education
Before we judge financial social media too harshly, however, lets appreciate the remarkable things about this form of financial advice, especially #fintok.
Firstly, a major positive is its ability to outreach to people of all ages, all over the world. The tag #personalfinance has gathered over 4.4 billion views. Research from F & C Investment Trust discovered that around one in six British 18–23-year-olds invested for the first time throughout 2020.
In addition, more than half of these new, young investors utilised investment advice from social media. This data shows just how much influence personal finance social media has on the younger generation and how it is promoting more people to think about the economic status from a younger age.
Secondly, these videos and tips are completely free. This is an amazing advantage to seeking advice from social media as currently a financial advisor can be anywhere circa to £250 an hour, which most people cannot afford. thirdly, these platforms have an incredible ability to manipulate the stock market.
Take game stop as a key example; a simple reddit user who convinced hundreds of like-minded individuals over social media to buy GameStop shares and hold them. This simple yet effective ‘short squeeze’ consequently increased the price of GameStop shares by 1500%, all due to social medias power over people.
In conclusion, personal finance social media is great because it’s free and universally accessible, however, financial advice should be personal to every individual. Millions of people viewing the same thirty-second video can’t all be put in the same economic box and herd mentality means you will not be the first to use a financial ‘hack’ or a ‘secret.’
Trying to find good financial advice on social media is like trying to find a black cat in a coal cellar, so be sceptical of all influencers. The best possible financial advice:
- don’t trust any financial influencers just because there trending or sound correct,
- don’t buy into their schemes or products,
- ensure you carry out extensive personal research,
- and always keep your options open.
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