4 things to consider before taking financial advice from TikTok
TikTok has become a popular social media platform for lip-syncing, sketch comedy and viral dance manners in recent years. But TikTok is no longer just a place where you can laugh and get a feel for the latest choreography.
From recipes to makeup tutorials, TikTok now has it all – including advice on how to manage your money. The next time you open the app, you may see a TikTok influencer handing out information on topics such as how to build credit and budget your cash.
Can you take financial advice from TikTok? Short answer – yes. But as with all other social media platforms, it is worth following others and others give bad advice. Here are some things to keep in mind before taking TikTok money advice.
In this article:
Think of the source
Delivering TikTok money tips with music and dance can be unconventional, but it's not necessarily a bad thing, especially since personal finance can be a scary topic.
"TikTok is great for financial literacy and empowerment for people who are on the wrong side of the economic divide," said Claire Hunsaker, a Certified Financial Education Instructor (CFEI) and founder of AskFlossie. According to Hunsaker, women, people of color and other groups build supportive, educational and inspiring content on TikTok to lift their communities.
A TikTok influencer may not look like the former average financial expert, but that does not mean they do not have valuable information to share with their TikTok followers. "TikTok gets a lot of hate as a platform," says Jake Founder, founder of DebtHammer, a personal finance publication that helps people make better financial decisions. That hatred may stem from the fact that it is aimed at a young demographic, and that most content producers are young, but the founder says that there are some knowledgeable people on it who want to share good information with their Gen Z audience.
behind it, however, is that there are some people who try to make money on hype, and there is money to be made – top TikTokers are reported to make millions of dollars a year.
Before taking a piece of financial advice, consider digging into the source before believing in a TikTok creator. "The first thing you should do is look up the creator's names to see if they are remotely connected in the financial realm," says the founder.
If they do not, the founder says it does not automatically mean that their advice is not good; you should only try to cross-reference their advice with other reputable sources to see if it checks out.
Be very careful with investment advice
Due to such factors as the strong development of the market in 2020, the meteoric increase in the price of cryptocurrencies this year and the bizarre meme share / GameStop situation earlier this year, people have an increased interest for (and fascination for) investing.
Of course, to feed that interest, influencers use their platforms to discuss ways to put money on the market. While someone may be able to explain investment strategies in general terms, there are references required to offer investment advice, especially if you charge for it. Even for those who give away free advice on their TikTok account, remember that investing involves risk, and some influencers discuss strategies where a lot of money can be lost.
Last year, a viral TikToker showed the process of alternatives. trade by investing $ 15,000 in Tesla calls. At one point, he dropped by $ 7,000, which would be no small sum for the average American. While he made a firm disclaimer – "please, do not try this at home" – it is an example of an investment strategy on TikTok that can make you lose a lot of money.
Julian Morris, a Certified Financial Planner professional and founder of Concierge Wealth Management, says getting licensed financial professionals provides advice on social media platforms, so beware. "This does not mean that you can not follow anyone's budget hack, but be extremely careful when advising on cryptocurrencies, securities, exchange traded funds, mutual funds or other real investments from anyone at TikTok."
If that sounds too good to be true, it's probably
Economic gurus are another thing to look at, says Hunsacker. "If someone is going to tell you how to make a million dollars in 60 seconds, they're leaving a lot."
In some cases, advice may be illegal. Social media, including TikTok, has been a threat to bad tax tips. For example, some users preach the benefit of forming an LLC as a way to write off a lot of expenses, including personal. Make no mistake – it could be tax evasion. (Before forming a business unit, it's probably a good idea to talk to a lawyer or accountant instead of using information from a TikTok content creator.)
Keep in mind that not all TikTok stars or personalities on social media give advice for the benefit of others. "People at TikTok are more interested in making money from their successors and generating likes and dislikes for themselves than helping you achieve financial success," says Morris. This may motivate some to intentionally or unintentionally give exaggerated advice to create a viral moment.
General Advice Is Often The Most Useful
If you look past click bait tips that can lose money or get you in trouble IRS, there is a wealth of general information about the TikTok app that can be helpful for people who have not had a formal introduction to concepts for personal finance. If a TikTok star is just trying to increase their engagement and create a viral TikTok video, maybe try to stay away from this account.
For example, Vanessa Aragon's channel teaches the basics of mortgages, such as how much you need to save for a $ 450,000 home. The PaydayPursuit channel has tips on side feelings. Lessons about the difference between a credit card and a debit card, the importance of emergency savings, how the student loan interest rate works and what happens during the home buying process can all be valuable when taught through a short video in an engaging way.
Who would have thought that the TikTok app would become a platform where you can keep track of the latest fashion trends and learn how to have your financial life together?
Remember that personal finance is personal
Whether you get financial advice from an article or watch real money tips on YouTube, Facebook, Instagram or TikTok, you should make sure it makes sense for your unique situation before using it.
TikTok is much like any other platform where there are people who give good advice based on a desire to help people. You can find these people by researching who they are and doing your own fact checking on the advice they give to make sure it is legitimate. In the end, the platform may be new, but financial advice – good, bad and strange – has been around for as long as the market has. Time-tested rules for doing your due diligence still apply.
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