What are the risks of listening to TikTok personal financial advice? Well, there are too many to list in this short article, but we’ll dive in and look at a few.
A New Medium for the Same Old Bad Information
Bad Financial advice has been around for as long as money has existed. TikTok just presents a new medium for people to spread it. Some of the advice is innocent enough. Things such as eliminating credit card debt and encouraging young people to start investing are discussed. But there is a whole other side of TikTok that spreads rumors, lies, and scams.
The social media platform can take any video and spread it to millions of people in a very short time. The result is unverified information going viral. The video could be one person’s experience making money on some trade, or it could be a person attempting to scam viewers by promising them millions of dollars if they invest in their program or business.
TikTok can be entertaining, but a 60 second video is not going to give you the financial advice that you need. Reading books or speaking to a financial advisor are much better choices than TikTok personal financial advice. I frequent Investopedia for online advice and learning.
Some Viral Financial Myths
TikTok has given rise to some incredible financial myths. It has also spread some others. Here are a few examples.
Pay as little a down payment as possible on your mortgage.
This advice could make sense for certain situations, but the individual presenting this is trying to get you to invest your extra money in a product that he is pushing. Conventional wisdom says to put down 20%. Investors may put down less, and there is an argument to invest your extra money in to markets as opposed to paying extra on your mortgage. The bottom line is to talk to a professional and decide based on your individual situation.
Pay as much on your mortgage as you can.
This is the exact opposite of the advice given above. Again, one size does not fit all. Personally, I would never tell someone to not pay off their debt as fast as possible, but before you start doubling up your payments based on a TikTok video take a step back and make sure this strategy fits your personal finances. How long you plan to stay in your current home, how far off retirement is, and what the rest of your budget looks like are all factors that you need to consider before paying extra on your mortgage.
The Federal Reserve has secret million-dollar bank accounts for every American
This story has been around for several years. TikTok just gave it a boost in popularity. The story goes that there is a letter on the back of your social security card that correlates to a bank account owned by the Federal Reserve. This account contains millions of dollars, and all that you need to do to access it is to use your current bank’s routing number but type in your social security number as the account number. Doing so will give you access to an account filled with millions of dollars. The problem is that this is completely false.
You would think that not many people would fall for such an outlandish claim, but the New York Times reported that over 107,000 payments totaling more than $100 million dollars had to be reversed because of people attempting to pay bills using the Federal Reserve.
Above are just a few examples of some of the financial advice and rumors that you will find on TikTok. Please proceed with caution when taking advice from strangers on TikTok or on any online forum or platform. Read books, talk to people who are successful with finances, and speak to certified financial advisors. You should take TikTok financial advice with a grain of salt. Some advice online has value but be sure to weed out the good from the bad.
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