Social media plays a significant role in personal finance knowledge and spending for younger generations, so much so that nearly 90% of banks actively engage across social platforms.
If the banks realize the reach of online content, influencers are no stranger to the possibilities either. With Debt.com’s second annual FinTok awards, recognizing the platform’s best financial educators, there’s a clear impact from content creators.
Addressing debt and personal finance is a significant problem since two-thirds of today’s youth don’t learn about money from their parents. The gap in financial literacy represents the number of people who look elsewhere for information, and not always in the best places.
Leveraging debt and making the best investments takes experience. As social platforms showcase, anyone can influence others, but not all influencers do so with proper research or credentials.
Impact of Social Media on Financial Literacy
In 2023, 65% of Nerdwallet’s surveyed adults felt social media use encouraged them to live beyond their means. Even with the impact of money dysmorphia, this self-assessment shows the potential negative impact of the internet on financial literacy. A Qualtrics study for Intuit Credit Karma indicates just over 40% of millennials and Gen Z experience insecurity about their financial standing (i.e., money dysmorphia).
Courtney Alev, a consumer financial advocate at Credit Karma, commented, “People are examining their finances and comparing themselves to their peers, people on social media, and even celebrities, which [brings up] feelings of inadequacy. This distortion between perception and reality can prevent people from taking steps towards achieving their financial goals.”
Self-reported data holds some value, representing potential opportunities for more research. However, social media’s supposed negative impact on self-esteem raises questions about the accuracy of these personal perceptions. Mindsets around money — coupled with internet influence — have the potential to produce positive or negative experiences.
Debt.com’s award categories, Best Debt Payoff, Credit Education, Personal Finance, Money for Under 30, and Hispanic Money Advice, indicate the most popular topics on TikTok. Personal finance influencers, or “finfluencers,” are on every social platform, but quantity does not always equal quality. Discerning the difference between useful tips and monetary misinformation for those lacking media literacy carries heavy consequences.
Sources of Financial Education
Social media provides an accessible starting point for those without solid sources of financial education and a lack of understanding when it comes to personal finance. Yet, the potential drawbacks of relying solely on content creators for financial education come with other problems. Microtrends like quiet luxury, loud budgeting, and cash stuffing impact how younger demographics spend and save.
These trends offer simplified steps for people interested in changing their financial circumstances. Socially influenced finance began with crowdfunding and peer-to-peer apps with features like ‘friending’ and sending personal messages. Although these apps now play pivotal roles in the gig economy, they paved the way for trust-based spending.
As spending becomes personalized, so do investing and saving. With increasing Gen Zers relying on social media for financial education, banking institutions and finance pros must evolve.
Russell Davis, the American Bankers Association’s executive vice president of member engagement, said, “Social media serves as an essential marketing channel that allows banks to connect with customers by meeting them where they are. When used effectively, social media helps banks humanize their brand and build relationships while offering a strong return on investment.”
Other reliable sources of financial literacy include podcasts and books. Some bestsellers include Personal Finance for Dummies, Your Money Or Your Life, and I Will Teach You to Be Rich. Other notable authors and personalities to follow include Robert Kiyosaki, Warren Buffett, Liz Weston, and Charles Ponzi.
Some podcasts, built on the hosts’ decades of experience, started as books or blogs. Shows like The Ramsey Show, The Clark Howard Podcast, and Women & Money fall into this category.
Value of Social Media Influencers vs. Financial Professionals
When learning about money, free information is its own reward. Yet plenty of people use their influence for brand deals and sponsorships or to sell their own products. Choose reliable, credible sources instead of taking on unnecessary risks with financial education.
Although some influencers provide valuable information, even bad advice holds some value. Most young adults remain skeptical about personal finance advice given online, ignoring doom and gloom content for positive mindsets. Their positivity makes even more sense, with 50% or more of Gen Z and millennials’ investments outpacing other generations.
While financial content creators’ reliability appeals to younger audiences, followers are fickle. Trendy, entertaining finfluencers attract subscribers but keep them with credible advice. Experienced professionals maintain their following with solid, reliable recommendations.
Personal finance advisors and other money pros have a fiduciary responsibility to the public, which means they must act in their client’s best interests. Social media influencers aren’t subject to the same requirements, adding more value to these money experts’ insights.
Consider both perspectives for a balanced approach. Ignoring free information is just as foolish as disregarding professional expertise. Making informed decisions means using all the available resources, current trends, and reliable traditions. Financial literacy is more accessible than ever.
