Top 5 Tips On How To Spot And Avoid Bad Financial Advice On TikTok

From DIY to dance to 60-second comedy skits, TikTok has become a platform for diverse content. It has become educational too with tutorials and even tips on how to manage finances shared by so-called “experts”. The hashtag #personalfinance on TikTok currently has over 10 billion views while the hashtag #fintok has over 4.7 billion views. There is also a lot of dangerous "advice" floating around the platform which should be avoided at all costs. However, it may be difficult for the layman to spot bad advice on TikTok.

Here are some tips to identify bad financial advice on TikTok.

1. Take a Look at the Creator’s Background and Credentials First

TikTok is rife with amateur experts, and it is hard to decipher the identity of who’s giving sound financial advice. Previously Forbes noted that TikTok personal finance influencers don’t have any real financial credentials. Thus, it is easy to get bad advice from people who appear to be famous with tons of followers but aren’t qualified to give any advice. Financial regulators and certifying bodies require individuals to pass certification courses, and only a certified financial planner (CFP) should be trusted on any platform. The non-legit “influencers” mostly talk about building wealth overnight, shorting the stock market, and sharing tips to avoid paying taxes. As per a CNET report, a recent WallStreetZen study found that 63% of stock-related videos on TikTok are misleading. Thus, it is important to look for creators with credentials and certifications who provide all the appropriate disclosures to their viewers.

2. Avoid Relying on a Single Source

Social media should not be the only source of financial guidance. People should follow several sources and alternative media to get their financial information. In case some advice or money trick sounds good on TikTok, users are advised to research it and see what other credentialed finance professionals say before taking any action.

3. Beware of Day Traders and Get Rich Quick Schemes

The hashtag #investing on TikTok has 17.1 billion views, while #investingforbeginners has about 1.3 billion views. This indicates that more and more investors are turning to the platform for investment advice. Leveraging this, day traders have taken over social media, and TikTok is rife with them. However, the advice coming from them may not be the best for beginners who have just ventured into investing. Videos like “How to invest $5,000,” or stories about how creators made tons of money in a day or two can in turn be far from practical, as long-term investing advice is more appropriate for a new investor. Thus, it is best for viewers, especially new investors to steer clear of the advice shared by Day Traders and advice that sounds like a get-rich-quick scheme.

4. Lookout for #Ads and Sponsored Content

It can be hard for novice users to differentiate regular content from paid content on social media. Creators get paid by a specific service or a product to create content around it. This content on TikTok is just advertisements in disguise, blurring the line between a creator who genuinely wants to help viewers and one who is selling a product for money. As per the industry standard creators are required to put a disclaimer that their video is an ad, but some don’t always do that. Thus, users need to take a step back to do their research even if the content is disclosed as an ad or sponsored.

5. Remember, Personal Finance Tips Are Not the Same for Everyone

It is simply impossible that a universal approach to managing finances can work for everyone. Such an approach disregards the specific financial circumstances which vary from person to person. For example, a popular advice shared on TikTok is that 6 months’ worth of expenses is enough for an emergency fund. However, this may not be the right advice for people with debt, a mortgage, or an extended family. Thus, financial advice is best when it’s tailored to an individual’s circumstances and financial footing. Users must be aware of the one-size recommendations shared on TikTok, particularly with investing and cryptocurrencies.