Tags: social | media | financial | advice

FinTok: Is Financial Advice on Social Media the Future?

FinTok: Is Financial Advice on Social Media the Future?
(Dreamstime)

By    |   Wednesday, 16 October 2024 01:30 PM EDT

Financial literacy is something that a tremendous number of people simply do not understand, and a study by the Mises Institute puts into perspective exactly how severe the problem is, with just 57% of Americans who understand basic financial concepts.

On one hand, I get it — most schools don’t teach financial literacy, so we have generations of people who grew up never learning anything about this foundational topic. On the other hand, I believe that it’s our own responsibility to create the best life we can, and if we need additional education to do that, the onus is on us to find it one way or another. So I’m not surprised that so many people have flocked to social media in search of ways to get more from their money, particularly when it comes to growing it.

While I initially had high hopes about what social media would do for financial literacy, today I’m less optimistic. I say that because anytime you have a large and enthusiastic audience, entrepreneurs will be drawn to it because it’s ripe for profit.

This isn’t necessarily a bad thing, it’s just when you get people who don’t know what they’re talking about, or worse yet, people knowingly spreading false information because it gets a lot of attention, that it becomes a problem.

The recent Chase banking “glitch” is a perfect example of that, where hundreds if not thousands of creators on the financial side of TikTok, also known as FinTok, were giving financial “advice” that was actually criminal wire fraud. The short version is that they recommended withdrawing bogus deposits, which were going through due to a technical glitch that prevented the system from confirming sufficient funds were in the account.

The number of people I saw all over social media posting videos saying things like, “OMG girlies, I tried the Chase banking glitch and it totally worked,” was astounding. Equally astounding was the fact that they couldn’t understand that this was fraud. Predictably, Chase came out swinging and announced it would be pursuing criminal charges, and at the same time, the perpetrators collectively cried, “How were we supposed to know this was illegal?!”

This wasn’t an isolated incident though. As much as I hate the word misinformation, I will use it here when I say that social media is filled with financial misinformation. Some are knowingly misleading people, while others are doing it unintentionally out of their own ignorance. At the end of the day, the outcome is the same—innocent people get hurt financially.

One example is financial gurus, or influencers, or creators, or whatever the kids are calling them these days, telling people with bad credit to just set up an LLC and apply for business credit under your new EIN. It seems like a pretty solid workaround to bad credit, right? Except it’s also fraud.

Another is when they advise people to file police reports claiming identity theft in an attempt to get negative entries removed from their credit report. Not only is this dishonest, it’s also a crime, and depending on the circumstances, it could be a felony. You also have the less extreme side of the coin where following the advice won’t get you in trouble with the law, but will still hurt you financially.

For example, a new law was recently enacted that changes how medical debt is reported, but many creators turned that into, “It’s illegal for medical debt to be reported. Buy my course and I’ll tell you how to get it removed.” Someone who has that problem probably isn’t financially literate, so at most, they might look up the law cited, see that it exists but not understand how it works, and then buy that creator’s products or services in an attempt to fix it.

But since it doesn’t work the way it’s been portrayed by that creator, it can't be fixed in the way the customer thought, and then they end up in a worse situation.

I hear so many wild claims like these every day because when these people get burned by these creators, they then end up having to come to us for guidance on how to fix their credit and get them legitimate business funding. The stories I hear are both hilarious and infuriating at the same time.

So what’s the solution?

The saying caveat emptor, or buyer beware applies here, even if you’re not buying anything from a particular creator. That’s because simply by consuming and implementing their advice, you are essentially buying it with your time and attention. You will reap either the benefits or the consequences of that decision, so you need to be careful whose advice you follow.

One strategy you can implement here is to look at their background, both in terms of their qualifications and how applicable their advice is to your goals. When I talk about qualifications, I don’t necessarily mean degrees or certifications—I also mean real world experience.

Case in point; I don’t have a fancy financial degree or any certifications, but because of the work I’ve done as the COO of a business funding firm and the financial information I’ve shared through my columns and my TV show, I’ve been asked to support financial literacy education by our local school board. In other words, I have multiple forms of third-party validation that I am a legitimate financial expert.

If you invest a few minutes looking into the background of these creators in Google and Bing, it should give you pretty solid insight into their qualifications. (Or lack thereof.) You should also look specifically for media features, and reviews or complaints about them online.

And finally, look through their content with a healthy dose of skepticism. Are their claims reasonable or outlandish? Do they seem more like a well-composed educator or a hyped up car salesman? Are they overly aggressive when it comes to their products or services? These can all be indicators too.

Another part of the problem is short form content, which makes up the vast majority of content on the internet today. Because people with the attention span of a goldfish want to quickly swipe to the next video, content generally needs to be short to hold their attention. This makes nuance far more difficult because there isn’t enough time to share the whole story, and that leads to people taking action without the full picture.

There’s a lot of financial information on social media today. Some of it is good and some of it is bad but at the end of the day, it’s on each of us to vet everything. We need to make sure they’re actually the experts they claim to be, and also that each individual piece of advice we’re considering following from them is accurate.

This is the key to making the best financial decisions for your life.

_______________


Amanda Webster is the COO of Fund&Grow, which helps entrepreneurs get the business credit they need to run and scale their companies. She is recognized as one of the leading experts in the industry, and is regularly asked to speak on the topic on stage and in the media.

© 2024 Newsmax Finance. All rights reserved.


StreetTalk
Financial literacy is something that a tremendous number of people simply do not understand, and a study by the Mises Institute puts into perspective exactly how severe the problem is, with just 57% of Americans who understand basic financial concepts.
social, media, financial, advice
1196
2024-30-16
Wednesday, 16 October 2024 01:30 PM
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