TikTok Is a Never-Ending Stream of Bad Financial Advice
A recent LendingTree poll found that 41% of Gen Zers relied on TikTok in the last month for financial advice, and indeed hashtags like #FinTok or #Money have hundreds of millions of views. But do these small videos really offer good advice? Often not – even funny. In many cases, an “expert” is simply an influential person with a large audience who does not have any financial background. Here are some examples of terrible advice and how to tell good from bad.
TikTok has all kinds of bad financial advice
The best and worst about TikTok is that complex topics can be broken down into easy-to-understand videos that are typically less than 60 seconds long. The problem is knowing when the advice is just wrong without doing your own research. Here are some of the bad financial tips you can see on TikTok:
Good advice that is not fully thought out.
This video shows you can earn passive income by buying pastry machines and installing them in high traffic areas. The video does not tell you that this side hustle and bustle is not so passive (the cars require constant maintenance), and that you cannot open a store in foreign territory without their permission, which seriously complicates how many cars you can install in a safe place.
This, in turn, limits your ability to make a lot of money in a business that does not initially make a lot of money (the income from coin changers is about $ 1 a day ).
Overly simplistic advice that lacks important context.
This video provides advice on how to “go from $ 200 to $ 50,000” by choosing the right stocks. However, the reason for buying the stock is based on superficial assumptions such as buying Zillow stock due to low mortgage interest rates, for example. But as the financial planner viewing this clip notes, this mortgage rate information is not new and is already included in the stock price.
What you don’t know from this video is company history, balance sheet, or debt. As always, past performance does not guarantee future performance.
Eternal, completely wrong advice.
This video advises to get money only in bitcoins, because “who can get you?” The answer, of course, is the IRS, which is taking tough measures against cryptocurrencies and even hiring outside contractors to identify cryptocurrency investors whose tax returns either do not contain or contain incorrect data on cryptocurrency transactions. If you follow this advice, you will have to pay taxes and fines, and maybe even criminal prosecution.
How to spot bad financial advice on TikTok
The problem is that a significant portion of these videos are created by untrained influencers who are more motivated by likes and followings than correctness. If they’re wrong, this bad piece of advice can be brushed aside by disclaiming the responsibility “it’s just my opinion,” as many TikTok creators do. So if you are looking for bad financial advice, be sure to ask yourself:
- Do they have credentials? Unless the influencer’s bio says that he is a Certified Financial Planner (CFP), Certified Public Accountant (CPA), or Registered Investment Advisor (RIA), and he tells you what to do with your money, be very skeptical.
- Is the creator trying to sell you something? If an influencer appears to be promoting a product or a particular type of stock, remember that they may have an undisclosed financial interest in what they are selling.
- Is it too good to be true? No one can accurately predict the future dynamics of the stock market, and if they could, they would not share it with the millions of TikTok viewers. Avoid getting rich quick investment tips; if it sounds too good to be true, it may be because it is.
- Can I check it out? Often, the only thing you can check about an influencer is his popularity, but that doesn’t mean the advice he supports is correct. You will always want to do your own research before acting on the financial advice offered in the 60 second video.