From Viral Videos to Real-world Impact: Unpacking the Pros and Cons of TikTok Financial Advice
By Nikita Wolff
Hey there, fellow finance enthusiasts! If you’re like me, your interest in personal finance may have landed you on a certain side of TikTok. The platform has made waves as an educational place in general, with plenty of creators showing their audience how to do things like change a tire, properly clean their washing machine, and disassemble their stove-top. But what makes taking financial advice from strangers any different?
Well… your retirement could be on the line.
We’d be remiss not to acknowledge the appeal of TikTok. With its short-form videos and addictive algorithm, it’s easy to get lost in an endless scroll, consuming a mix of entertaining content, news, and education. But, becoming even more popular and prominent on the FYP are the financial tips creators are sharing. It wasn’t that long ago that videos like these were less common and accessible.
Why is that? It’s my theory that part of that stems from the lessening cost of entry. Institutions like Fidelity have revolutionized the barrier to entry for the average person being able to invest, with mutual fund minimums of only $1. Online forums like Reddit have become increasingly popular, and with the use of “upvotes” and “downvotes”, you can usually decipher what’s sound advice and what isn’t. And more broadly, having the internet at our disposal has given us a powerful tool to learn from experts, and rely on websites like Investopedia and NerdWallet. Gone are the days of trust fund babies being the only ones with access to financial knowledge.
From budgeting and debt management to IRAs and the 2-step process for actually investing the money in a fund, TikTok creators have taken it upon themselves to enlighten the masses, which I’d argue is a really good thing. These videos often make finance more digestible and relatable, and they’re catching you where you’re already spending your time.
However, there’s an ugly side to these creators pumping out content that’s attention-grabbing; easy content creation can lead to fear-mongering videos that do nothing but overwhelm the audience with (often uninformed) inflation and return numbers, and have basically no point in their message but to make you feel like there’s not even a point in trying to save for retirement at all. These are the videos that do a lot of harm. As you know, time is your greatest asset for retirement. Putting a discouraging video in front of a 25-year-old might delay them from investing for another 10-20 years, which robs them of 1-2 doubling periods (if looking at the rule of 72). That really could make or break their ability to retire.
Some general warnings to heed:
- See if they hold an actual credential, such as the CFP©. A Certified Financial Planner is required to act in your best interest as a fiduciary.
- If it lacks reference material, take that as a sign to question their claims.
- Evaluate if they have a conflict of interest. Some easy examples of this would be a Real Estate agent saying that the only way to retire is by investing in real estate, or someone selling financial products such as Whole Life Insurance (which is scammy in most cases, btw).
Stay the course. Remember the Magnificent 7 principles from our classes? Staying Focused was one of them, and we include it as a top principle because it’s easy to get distracted or scared when people use our psychology against us.
One of the biggest criticisms of TikTok’s financial content is the potential for misinformation. As with any platform that relies on user-generated content, there’s always a risk of encountering advice that’s inaccurate, misleading, or oversimplified. Remember, not everyone who claims to be an expert is truly qualified. It’s essential to approach TikTok financial advice with a healthy dose of skepticism and fact-checking. If something sounds too good to be true or seems questionable, it’s always a good idea to cross-reference the information with reliable sources (like those in our blogs, or one of our favorite YouTube channels, “Two Cents”).
TikTok’s format, while great for quick tips and tricks, might not always provide the depth and nuance necessary for comprehensive financial education. After all, finance is a complex field, and some concepts simply cannot be condensed into short-form videos.
So, is TikTok a suitable place to seek financial education? The answer, like with most things, lies in moderation and critical thinking. TikTok can be a valuable source of inspiration, motivation, and simple tips to kickstart your financial journey. It can introduce you to new ideas and encourage you to explore them further. However, it should not be your sole source of financial education. Use it as a supplement, a starting point, and a gateway to deeper learning.