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From putting your toddler children on your payroll to claiming your car as a business expense, TikTok is chock-full of potentially bad money advice.
Yet, financial TikTok, also known as #FinTok, is one of the most popular sources for financial information and tips, particularly among Generation Z.
Now, 27% of social media users say they have fallen for financial advice or information on social media that turned out to be false or misleading, according to a new report by Edelman Financial Engines.
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Roughly 20% have even fallen for such misleading content multiple times, the report found. Edelman Financial Engines polled more than 3,000 adults over 30 from June to July.
“It’s hard to discern what’s good advice from what’s not good advice,” said Jean Chatzky, personal finance expert and CEO of HerMoney.com, who worked with Edelman Financial Engines on the report. However, “if it sounds amazing, it’s probably too amazing.”
Heavy social media users, likely younger Americans, may be particularly susceptible to believing inaccurate financial information found there, according to Edelman Financial Engines.
Gen Zers may be more likely to get duped
With less access to professional financial advisors and a preference for obtaining information online, Gen Zers are more likely than any other generation to engage with finfluencer content on TikTok, YouTube and Instagram, according to a January report by the CFA Institute.
In fact, Gen Zers are nearly five times more likely than adults in their 40s or older to say they get financial advice — including stock tips — from social media, a separate CreditCards.com report from April also found.
In some cases, having such an accessible source for money-related subjects can help, particularly if it encourages better budgeting or savings habits, said Isabel Barrow, the director of financial planning at Edelman Financial Engines.
However, “you have to take everything that you hear and see and read on social media with many grains of salt,” Barrow said, especially when it comes to topics such as how to avoid or limit taxes.
“It may be good advice for someone but it is not a one-size-fits-all thing.”
‘Do your own vetting’
While there are ways to vet traditional financial advisors, it’s much harder to find out the intentions or possible conflicts of interest of someone giving advice online.
“Check out who you are listening to and what their background is and whether they actually have the credentials to be leading you down the road you are about to follow,” Chatzky said.
Until there is more oversight, the CFA Institute also advises consumers to look into a finfluencer’s qualifications as well as potential financial motivations such as commissions or sponsorships, and cross-check any information offered online.
“You do need to do your own vetting,” Barrow said.
To verify a certified financial planner’s background, go to the CFP Board’s website. Brokers and brokerage firms can be looked up on the Financial Industry Regulatory Authority website and investment advisors can be checked out on the U.S. Securities and Exchange Commission’s website.
For other professional designations, go to the FINRA page that lists them, which includes links to the designation organizations.
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