Can You Trust Financial Advice You Get on Social Media?

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  • Millennials and Generation Z commonly get financial advice through social media.
  • Some people on social media may give out sound advice while others might not.
  • Checking the person's credentials and getting second opinions can help you avoid costly mistakes.

You don't want to put your trust in the wrong person.

Social media has changed our lives forever in good ways and bad ways. We can now connect with people all over the world and come together for causes we support. But it can also promote harmful messages and misinformation. You've probably heard about issues like unrealistic standards of beauty and false news reporting. But that might not be all you have to worry about.

Nearly 80% of millennials and Gen Zers report receiving financial advice from social media, according to a recent Forbes survey. But not every influencer is giving out great information. Here's how to know when to listen and when to move on.

Check their credentials

When getting information from a financial advisor or a site like this, it's not too difficult to know whether you're dealing with people who know what they're talking about. But that can be more difficult to assess when you're talking about any random person with a blog or a camera.

They don't necessarily need a finance degree or any credentials after their name in order to provide sound advice, but they should have some relevant background. For example, if they're teaching you how to pay off your debt, ideally, they have some experience paying off a large amount of debt themselves. If they're giving advice they haven't tried -- or wouldn't try -- themselves, that could be a red flag.

See what you can find about the person giving the advice before you follow it. If you can't locate anything that explains how they know what they claim to know, either move on to another source or reach out to them directly to ask.

Be wary of extreme moves

You've probably heard the stories of people who invest in a stock or cryptocurrency, sometimes at the suggestion of others on social media, and make a fortune. Those people do exist, but there are a lot more who try these strategies and end up losing money. So it's important not to let an influencer sell you on the idea of getting rich quick.

If they're suggesting that you dump a lot of your popular investments and pick up some of their favorite penny stocks instead, that should set off an alarm. It's always best to keep your money diversified while investing, and if a lot of these sudden, risky moves were worth it, everyone would be making them.

Keep a level head and get a few different opinions before you make any major changes to your financial strategy. If you can't find any other financial expert who agrees with your influencer, that's a good sign it's not a smart move.

Make sure it's the right move for you

Some pieces of advice can be great for some people and bad for others. For example, saving at least 10% of your income for retirement is a sound suggestion for a lot of people. But if you're drowning in credit card debt, focusing on retirement first probably isn't wise. Your credit cards will continue accruing interest, probably faster than your investments will make you money. Pay off your credit card debt first, then focus on retirement savings.

Hopefully, the person you're getting information from will provide the necessary nuance about who the target audience is. But if not, you may have to do some research on your own to decide if it's a good decision for you.

Watch what they're selling

Influencers and bloggers often make money by selling products to you. It might be a book or a physical item, but often in the finance world, they could also be getting money by encouraging people to sign up for a new bank account or credit card through their affiliate links.

There's nothing wrong with this and it doesn't mean what they're recommending is bad. But you should recognize that their income is probably a significant concern for them as well. They might recommend a product they'll earn a commission on before a better product they're not affiliated with, just so they can earn a little money.

Take their suggestions into consideration, but do your own research as well. Compare a few products and dig into their features and fees before deciding which one is best for you.

The above tips apply to any source of financial information you come across, not just social media. By reading widely and getting a few different opinions, you'll probably learn more quickly and be better able to spot bad advice when you come across it.

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