“Free advice – you get what you pay for” is a truism for many people when it comes to financial advice offered on social media. True, some people made buckets of money recently from following the Reddit group Wall Street Bets and heeding the group’s recommendation to purchase GameStop stock. But many more “investors” that jumped in were late to the party and ended up losing all of the money they invested.
Reddit isn’t the only social media platform known to have self-proclaimed financial gurus doling out free advice. TikTok, the short-form video-sharing app that is now being touted as the fasting growing social media platform, has also come under scrutiny for videos being shared that provide very questionable financial advice to people desirous of improving their personal finance acumen.
It’s truly a dilemma. Many questions arise:
- Should TikTok be held accountable for videos containing faulty financial advice?
- Who’s qualified to draw the line between good advice and bad advice?
- Should all financial advice come with a disclaimer to protect those viewing the videos?
Let’s take a more in-depth look and see if TikTok is a legitimate way to gain a financial education.
It’s not all bad
What classes did you take on personal finance when you were in high school? If you’re like most of us, probably none. Maybe your parents gave you some advice when you were growing up, if you asked for it. But, most of us got our personal finance education through the “school of hard knocks.” We learned about credit, borrowing, saving, investing, and all other things finance-related through trial-and-error. (Much of it was error.)
Fortunately, there is now an educational medium that offers advice on personal finance. It’s free, and there is no shortage of information designed to educate and advise you about your money. It’s called social media.
People have been turning to YouTube for years to get educated on how to best handle their finances. You can learn about all things money-related from many, many different sources. Some have good intentions; some don’t. You have to comb through a number of videos on a given topic to find some consistency. But, you can get a good education.
TikTok is the latest frontier for those looking for financial know-how. It’s estimated that 70% of the TikTok faithful are age 13-24, and they’re hungry for information on finances. Some would say a thirteen-year-old lacks the life experience to understand financial matters; others would argue that today’s youth know more than we think they do, and they’re never too young to start learning. As one old sage put it, “Ignorance is not bliss. It’s poverty.”
Though it’s hard to get educated on a complex financial topic, like investing, through a 60-second video clip, general terms and fundamental concepts can be caught by those interested enough to watch. The viewer won’t be qualified to teach a course in personal finance, but they will begin to get a snippet of the big picture. A previous generation learned much about personal finance from Dave Ramsey and Suze Orman on the dominant media at the time — television and radio. Who’s to say people’s financial lives can’t be changed through social media, like YouTube and TikTok?
[ Related read: 11 of the best personal finance blogs & websites in 2021 ]
But it's not all good either
Not all of the information on personal finance on TikTok is helpful or accurate. Alongside the good advice and educational lessons, there are the get-rich-quick schemes from those preying on the vulnerable and uneducated. False promises abound.
Millions of Americans are experiencing financial hardship at any given time. They’re looking for some sign of hope that their situation can and will change, making them susceptible to those that want them to part with the little they have by promising them things they have no intention of delivering.
For example, life insurance has been sold as an investment for many years. Yes, some policies do have a savings component that accumulates money over time. But, it’s still life insurance, and most people the age of TikTokers shouldn’t be having life insurance pitched to them if they’re interested in learning about mutual funds and dollar-cost averaging. But, there are life insurance agents on TikTok pushing their wares on the young and impressionable.
Day traders also abound on TikTok. They can be found pushing a particular stock and telling the video viewer that it’s a “sure thing” investment. Their target audience is the young trader who has an account with the infamous brokerage Robinhood and is gullible enough to hit the “Buy” button on the Robinhood app on their phone, with the hope of quick, easy money coming their way. The day trader is banking on enough viewers doing this to push the stock price up before he sells it for a nice profit, also known as a “pump and dump” scam. Unfortunately, the young trader is stuck with a stock that they’ll likely sell for a loss.
[ Related read: Why financial literacy is more important now than ever before ]
What to do with this advice
While social media is a legitimate way to learn important financial terms and concepts, It’s a “buyer beware” market as well. TikTok viewers must also do their own research and get more information from trustworthy sources to determine if the information they’ve been given is relevant and useful for their situation and financial goals.
It’s always wise to get a second opinion when it comes to your money and your health. Spend a little more time checking out the credibility of the maker of that 60-second video and confirm that the advice you received is appropriate and accurate. It’s up to you to get a good education.
Having grown up in upstate New York, Bob Phillips spent over 15 years in the financial services world and has been making freelance writing contributions to blogs and websites since 2007. He resides in North Texas with his wife and Doberman puppy.
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