Social media platforms like TikTok have made personal finance topics more accessible and more engaging to Gen Zers—but have also increased the risk of receiving misinformed advice.
Gen Zers (born between 1997 and 2012) are nearly five times as likely as adults older than 41 to say they get financial counsel from social media, according to a CreditCards.com survey. With its interactive and communal nature, #FinTok, the financial tag on TikTok, helps young users find and engage in financial conversations, making the learning process more dynamic than what their parents may have experienced when learning about money as a young person.
This content has empowered many young people to take an interest in their financial futures, said Leasa Melton, manager of product strategy at BOK Financial®. "So long as they are practicing discretion, this can be a great step forward as it encourages financial literacy and proactive money management," she noted.
However, there are risks, she and other experts cautioned. For instance, people who receive financial advice on social media may also be exposed to a variety of risky money fads which are sometimes shared by unvetted social media financial influencers, or "finfluencers." While anyone on the internet may claim to be an expert, in the case of financial advice, it is important to verify credentials, experts said.
"These influencers can profoundly impact Gen Z, often blending useful advice with financial trends that may carry risks and lack accountability online," Melton warned. "As these influencers share financial information more widely, the distinction between credible advice and mere entertainment has become blurred, potentially leading to misinformation and risky financial decisions."
While some finfluencers provide balanced views, many glorify potentially high returns without adequately warning about the high risks and volatility involved. For example, they may promote volatile investments like cryptocurrencies, speculative strategies and get-rich-quick schemes that may seem too good to miss. Moreover, since only 20% of finfluencer content with investment recommendations included any form of disclosure, according to the CFA Institute, the resulting lack of transparency can lead young investors to make impulsive decisions without fully understanding the implications.
"As these trends draw broad attention, it's a great opportunity for parents to talk with their young adult children to explain opportunities for investing in a relatable way to pique their interest in the topic, but also warn them about the potential risks and rewards of investing," said Jessica Jones with BOK Financial Advisors.
"As these influencers share financial information more widely, the distinction between credible advice and mere entertainment has become blurred, potentially leading to misinformation and risky financial decisions."- Leasa Melton, manager of product strategy at BOK Financial
Know the lingo
But engaging with their Gen Zer about what they learned on #FinTok may require parents to learn a few new terms first.
This generation has developed its own financial vocabulary and trends, many of which are shaped by this generation's perceived economic challenges, such as rising student loan debt, lack of housing affordability and an unpredictable job market. These topics and trends have led to the rapid dissemination of financial tips, habits and ideas among young people. Parents may notice their teens or young adults using terms they have picked up online, such as:
- Loud budgeting: Budgeting that involves openly vocalizing your financial goals, spending limits, and decisions to those around you to promote transparency and accountability, therefore helping young people adhere to their budgets through peer support and confidence.
- Cash stuffing: A modern twist on envelope budgeting, cash stuffing involves withdrawing cash and dividing it into categories to manage spending.
- Soft savings: Prioritizing well-being and present enjoyment over aggressive savings, this savings strategy reflects Gen Z's response to immediate economic pressures such as inflation and student loan debt while still aiming for financial stability.
- Doom spending: Triggered by anxiety and uncertainty, doom spending involves excessive spending on luxury items or experiences to cope with stress.
- Free money: This playful term, sometimes called "girl math" describes spending strategies or any kind of purchase that does not directly affect one's current bank account balance such as the use of store credits, cash back or potential savings through a sale to justify purchases as "free."
"While these terms may seem silly or lighthearted, familiarizing themselves with these terms is essential for parents. They give insight into the pressures young people are facing and can help parents better empathize with their children as they strive toward financial independence and stability."- Jennifer Ellis, a senior consumer product manager at BOK Financial
Understanding Gen Z
Understanding more about the characteristics and challenges of Gen Z may also help parents better empathize and support their children, especially older members of the generation who are getting out on their own. For example, three in 10 respondents to a recent survey of Gen Z and millennials reported not feeling financially secure and roughly six in 10 said they live paycheck to paycheck. And their concerns are not without merit:
- As of April 2024, the unemployment rate for 20–24-year-olds in the U.S. surged to 6.7%, much higher than the 3.2% rate for workers over 25, according to the U.S. Bureau of Labor Statistics.
- As of 2022, Gen Zers had an average student loan debt of $20,900, or 13% more than the average millennial.
- Around 31% of Gen Z adults live with their parents because they cannot afford to rent or buy their own homes due to rising housing prices and rent.
How parents can help
As young people increasingly live their lives online, it is crucial for parents to understand current realities around where their children are getting information and how they're evaluating opportunities, especially as they begin to manage their own finances.
"Understanding Gen Z's social media influences can help parents guide their children toward making sound financial decisions and help them address their money concerns more effectively," said Ellis. "Parents need to remember that by fostering open discussions and critical thinking, we can help the next generation make wise financial decisions."
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