Social media platforms are more than just sources of entertainment – platforms such as TikTok now have content creators giving “advice” on a wide range of topics, from health care to finance.
One example of this is the rise of the hashtag #FinTok on TikTok. A survey conducted by market research company Prolific found that 79 per cent of millennials and Gen Z receive financial advice from social media.
However, should we be relying on social media for something as personal and important as our finances? Are there any potential pitfalls that we need to watch out for?
TikTok’s role in driving financial literacy
Social media platforms such as TikTok have emerged as tools for raising awareness about the importance of personal finance among a generation that may have, otherwise, found such topics too dry or inaccessible.
In bite-sized, engaging videos, creators attempt to break down complex financial concepts, offer practical budgeting tips and demystify investing.
Such content often transcends geographical borders, allowing people to interact with and get advice from creators worldwide.
Studies have found that social media can help normalise “money talk” and imbue people with a sense of empowerment.
But is that enough to communicate the complexities of investing and support informed financial decision-making?
TikTok may have been the catalyst that sparked your interest in personal finance – but you should understand who is offering advice, what qualifications they have and, therefore, the level to which they are able to deliver for you.
Anyone can be a financial influencer
Finance influencers, or "finfluencers", can connect with consumers and build communities of like-minded people.
However, while you must be licensed to give professional financial advice in the UAE, not all financial influencers are certified.
That means financial information on social media may not always be accurate.
But when we are scrolling through TikTok, most of us do not bother to look up the qualifications of these influencers – only 31 per cent of millennials and Gen Z regularly check whether financial influencers are certified, the Pacific survey found.
Lack of personalisation
Social media is designed to cater to a broad and diverse audience. While such content appeals to a wide audience, it often fails to consider your individual financial situation and goals.
Even if there are some basic personal finance and investing principles, there is no one-size-fits-all approach when it comes to executing a financial plan.
Oversimplification of financial concepts
Personal finance is a multifaceted field, encompassing various aspects such as budgeting, investing, retirement planning and more.
To create digestible social media content, creators often condense complex financial concepts into bite-sized chunks. Such oversimplification might lead to misunderstanding and incomplete financial knowledge.
Confirmation bias
Social media platforms rely heavily on their algorithms to push content based on attention grab. Hence, people are often exposed to content that aligns with their existing beliefs and biases.
For instance, if you are constantly fed content around stock trading, this may reinforce your view that short-term profit-taking is the best way to build wealth.
But there are strong merits to long-term investing; staying within a social media echo chamber means missing out on knowledge and opportunities to explore sound financial strategies that may suit your risk profile and lifestyle.
Surround yourself with qualified financial support
If social media made you pay attention to the fact that you must manage your money better and put in some effort, that is great!
But from here on, we suggest relying on reputable channels (even on social media) that will help you turn this newfound interest into a plan that works for you.
Digital wealth management platforms have also emerged as a promising alternative to traditional ways of building wealth.
Unlike the traditional wealth management industry, where advice is often skewed towards benefitting the bank, such platforms can operate independent of financial institutions.
Remember, your financial journey is an individual quest that evolves and grows.
At every stage of your journey, you have a wealth of information available at your fingertips – the key lies in curating a balanced financial “diet” that incorporates trending ideas from content creators and knowledge from verified sources.
Joseph El Am is general manager of StashAway Mena
