Social media has become a massive component of our society's day-to-day life. While scrolling through Instagram, TikTok, or Facebook you'll likely encounter posts from influencers covering a wide variety of different interests. Social media can be helpful for finding a tasty new recipe or fun travel tips, but it may not be the most reliable place to seek financial advice.
There is no shortage of content creators, also referred to as "Finfluencers", posting financial advice out there. In fact, a recent survey found that about 80% of Americans in the millennial or Gen Z age groups have received financial advice from social media. But just because you see it while scrolling does not mean you should listen to it. Here are some things you should be looking for before you follow any financial advice you find on social media.
Research Their Qualifications
Before deciding to take someone's financial advice, you should look into their credentials. Anybody can post on social media, so it's important to make sure you're receiving advice from a reliable source. Some of the qualifications you should be looking for are a college degree in a relevant field, professional experience in finance or business, along with licenses and certifications. If they are someone with a significant history of investment success, this could also make them a reliable source as well.
If you can't find any of the above for the poster, then you should be very cautious listening to any of their advice.
Avoid One-Size-Fits-All Advice
A major red flag for social media financial advice is a one-size-fits-all approach. There is not a single financial strategy that will work for everyone. Every person's financial situation is unique to them. If an influencer suggests that something that works for another person in a vastly different position financially than you will also work for you, they are likely wrong. They'll also often leave out the potential risks associated with their advice.
For example, one of the most common financial topics discussed on social media is budgeting. How could you have the exact same budgeting goals as someone with a different income, expenses, and lifestyle?
Influencers don't know your personal finance goals, so be wary of one-size-fits-all advice and make sure what you are listening to fits with where you are and where you are looking to get to.
Consider The Influencer's Motives
While there are definitely a large number of Finfluencers that are posting to try and help people, there are plenty looking out for themselves. In 2021, more than 95,000 people reported about $770 million in losses to fraud initiated on social media. Be wary of these social media scams — if something seems too good to be true, it likely is. Things to look out for include if they are asking you for money, or asking you to purchase a specific product or service.
Even if it's not necessarily a scam, influencers aren't always promoting something because they believe in its merits, as they are often compensated to promote a product or service. If a Finfluencer is claiming a specific product, service or even investment will work magic on your finances, be cautious of it being a post paid for by the company.
Ultimately, while there is absolutely some helpful financial advice out there on social media, you need to know who to accept it from. There is some quality educational material you can scroll across, but it should not be used as your complete guide for how you are handling your money. If you are ever in a serious financial situation and are looking for help, you should contact a professional. Just be mindful as you scroll and consider these three things before acting on any financial advice you find.
Erin Ellis
Accredited Financial Counselor ®
Philadelphia Federal Credit Union
eellis@PFCU.COM