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Instead of getting advice from financial advisors and tax professionals, young members of Generation Z are instead turning to social media influencers for advice. Often, this involves exploring TikTok for quick snippets of advice and how-to’s. Needless to say, this could lead to some very serious problems.
TikTok vs. the IRS
Take, for example, the number of people who now rely on #FinTok – the part of TikTok that doles out financial advice – for tips and tricks on how to fill out their taxes. Most people are looking for tips on how to lower their tax bill, so they are often vulnerable to ill-advised tax deduction ideas. It’s gotten so bad, in fact, that the IRS has had to come out and say it directly: don’t rely on social media for your tax advice.
For example, some people think that putting their young kids on the payroll is somehow OK and will pass muster with the IRS. Others think that all of their personal car expenses can somehow be used to reduce their tax burden. And still others think that they might not have to file taxes at all, as long as they explore a few “loopholes” proposed by TikTok influencers.
TikTok vs. Wall Street
It gets stranger still when you consider that people are using TikTok as advice for investing in their future. Need a quick stock pick idea? Go to TikTok. Looking for a high-flying cryptocurrency capable of turning you into a millionaire overnight? Spend some time on TikTok. Not sure how to save for retirement? Just listen to a quick 30-second video clip from a random stranger with unknown qualifications.
Certainly, young people are to be applauded for their take-charge, DIY approach to investing. There’s no ironclad rule that says you have to use a financial advisor to plan for retirement or a registered broker to manage your investments. A lot of people like to pick their own stocks and cryptos. Fair enough.
But here’s the thing: most people have no idea that most financial advice is extremely misguided. Depending on your age, and your overall financial situation, the advice you need can be quite different from the advice for other people.
How to avoid financial scams on TikTok
There are new numbers to back up the notion that young members of Generation Z are falling prey to bad advice on TikTok. Edelman recently polled 3,000 adults and found that more than one-quarter of them (27%) had taken bad advice from TikTok. And nearly one-fifth of them had fallen prey to bad advice on multiple occasions.
That being said, there are a few easy steps that you can take to avoid becoming a victim of bad financial advice on TikTok. First and most importantly, listen to your gut. If it sounds too good to be true, it probably is. Most people have absolutely no idea how many financial scams are out there from people who are only all too willing to take their money.
And, before you take any life-changing financial moves, have a closer look at the qualifications or background of the person giving that advice. After all, social media influencers might have a very real incentive to push you in a particular direction or into a particular financial product, if they are picking up a commission along the way.
There’s no denying that TikTok can be a source of new ideas and new business creativity. You might even learn about the financial markets or how the economy works by spending some time on TikTok. But if you really think that you’re going to outsmart the IRS by listening to a TikTok influencer, then you might need to re-think your approach.
