TikTok Is the Place To Go for Financial Advice If You’re a Young Adult
The short videos are ideal for many people. But is the advice any good?
By Cheryl Winokur Munk
Tue, May 4, 2021 10:23am
6 min
6 min
TikTok is the place to go for new dances, viral taco recipes—and, now, financial advice.
The big benefit of TikTok is that it allows users to dole out and obtain information in short, easily digestible video bites, also called TikToks. And that can make unfamiliar, complex topics, such as those related to personal finance and investing, more palatable to a younger audience.
But can TikTok users, many of whom are in their teens, 20s or early 30s, trust the financial advice that is increasingly being offered on the social-media platform?
That advice runs the gamut, from general information about home buying or retirement savings to specific stock picks and investment ideas. Rob Shields, a 22-year-old, self-taught options trader who has more than 163,000 followers on TikTok, posts TikToks under the username stock_genius on topics such as popular stocks to watch, how to find good stocks and basic trading strategies.
Most times, TikTok users don’t even have to search for information that might appeal to them—it comes right to their feed based on factors such as their user profile and usage.
To be sure, TikTok isn’t the only social-media platform popular with young people that features financial advice. YouTube and Instagram carry videos with financial content as well. But TikTok is a hit with younger generations in part because of its quick-hit videos, easily navigated swiping functions and highly personalized content suggestions. And the numbers of young TikTok users viewing financial-related content on the platform of late have surged, a trend that many users and industry professionals expect to continue.
A survey conducted in late January by LendingTree’s MagnifyMoney unit shows about 41% of Gen Zers, those born roughly beginning in 1997 up until a few years ago, reported turning to TikTok for investment information within the past month, versus 15% of millennials, often categorized as those born between 1981 and 1996. Recent research from Greenlight, an allowance and debit-card app that recently launched a financial-education and trading arm, shows that 35% of respondents age 13 through 20 have turned to TikTok for personal-finance and investing advice.
“There are very few educational resources about personal finance that are accessible and compelling to young people,” says Tim Sheehan, co-founder and CEO of Greenlight. “So it isn’t surprising that kids are turning to social media. TikTok, in particular, provides quick, digestible content that can instantly capture your attention,” says Mr. Sheehan. However, he adds, “Misinformation dominates social media and it can be very difficult to discern the facts.”
Dana Eble, a 25-year-old public-relations professional in Detroit, says she likes the idea that she’s learning things on TikTok from people who are close to her age and don’t come across as judgmental or preachy about what she should be doing with her money. Many of the finance articles she sees online, she says, target people in their 40s and 50s and the advice isn’t always pertinent to her.
“A lot of people my age are living on a shoestring budget, and the advice on TikTok seems to match where younger people are in life,” says Ms. Eble. “TikTok doesn’t make me feel bad if I buy a Starbucks once a month.”
But some financial professionals and TikTok users themselves express concern about the accuracy of financial advice sometimes given on TikTok and a lack of transparency, in some cases, regarding the identities and qualifications of people giving the information. While some trained investment professionals post TikToks, there are other so-called social-media influencers who post about financial matters on TikTok who have little or no formal financial background. In some cases, it is hard to find a TikToker’s real name, and it can take legwork to figure out their qualifications or whether they have a personal financial motivation for promoting themselves on TikTok. What’s more, some TikToks contain misleading or wrong information, make overly rosy claims about investment potential or include overly broad statements that could lead to significant financial missteps, according to financial professionals and users who have come across these types of TikToks.
Content related to general budgeting, saving money, cutting expenses and making smarter purchasing decisions is pretty innocuous, says Brian Walsh, senior manager of financial planning at SoFi, an online personal-finance company that offers products like loans and investments as well as free financial advice. But Mr. Walsh says there are other TikToks that concern him, such as the handful he saw that claimed that a fail-proof way to invest is by mimicking the holdings of top-performing actively managed mutual funds. Such lists of holdings are only historical snapshots, Mr. Walsh says, and the technical factors that might have led a fund manager to purchase those stocks might have changed in the meantime.
Mr. Walsh says he also is bothered by TikToks he has seen that proffer advice about buying rental properties and leveraging the risk, and that encourage home buyers to put down as little as possible up front. While these strategies might be appropriate for some viewers, he says he is worried about the possibility of younger people—who might be more naive or trusting—blindly following overly broad advice and being harmed financially as a result.
For its part, TikTok, on its financial-related hashtag pages, warns users to be careful of the financial advice they see on the platform and to report behavior that might fall short of community guidelines. On its #fintok page, with more than 296 million views, it states, “Before following any financial advice, keep in mind that all investments involve risks and consider doing your own research.” The company places similar notes of caution on pages for terms such as #stocktips, #cryptotrading and others. TikTok also has consumer guidelines against fraud and scams, including multilevel marketing operations. In addition, many TikTokers add disclaimers to their profiles saying things like “my opinions” and “not advice.”
“TikTok aims to promote a welcoming atmosphere for people to learn and find entertainment,” a company spokesperson says. “We’ve seen our community embrace a range of enriching ideas and content, and we’re focused on supporting that with both creative tools and safety features to help that authenticity thrive.”
Potential concerns aside, many young people in their 20s and 30s say they find TikTok’s medium appealing and use it to help educate themselves about pertinent financial-related topics that they often haven’t learned in school or from their parents.
“Many millennials don’t want to sit through a 30-minute or an hour or full-day seminar on finance,” says Amanda Israel, a 35-year-old certified pediatric sleep consultant in Philadelphia, who uses TikTok to learn about various financial topics she’s unfamiliar with, such as teaching children to be savers, buying investment properties and business financing.
The platform is a good starting-off point for learning about topics such as budgeting and retirement, says Lindsey Tayne, a 23-year-old senior at Northeastern University in Boston. If something catches her eye on TikTok, she says she makes sure to read posters’ bios and Google the topics to learn more.
“It’s a very fun, easy way to digest and eat all this content up,” says Taylor Price, a 21-year-old influencer with one million TikTok followers. Ms. Price is also chief executive at TAP Intuit, a financial-education platform that focuses on Gen Z. Ms. Price, who majored in finance and management in college, posts on a variety of basic investing topics that many young people aren’t learning in school; recent subjects include debunking common money myths, renting vs. leasing, summer side hustles, her current investment strategy and how taxes work.
Before posting a money-related video, Ms. Price says she does “extensive research” about the topics. “However, just because I do my own research does not mean viewers shouldn’t do their own due diligence, too,” she adds.
Several TikTok users also say they’ve made financial decisions based on TikToks they’ve watched.
Kim Bayle, a 30-year-old footwear-company sales director in San Juan Capistrano, Calif., says she was recently inundated with TikToks about cryptocurrency and she decided to invest $100.
“I have no idea why I bought what I bought,” she says. “They just said buy ethereum, so I did. It feels kind of stupid saying that. But I find myself getting influenced on TikTok all the time.” Still, she says she feels comfortable with her small purchase. “Anything more than that, I probably would have been uncomfortable with it,” she says. She has also bought a number of stocks based on investment strategies she has seen on TikTok.
The best thing to do when considering advice seen on TikTok, experts say, is to double-check everything with a reputable source, such as a financial adviser or accountant, before acting. “If it sounds too good to be true, it usually is,” says Ivan Knauer, a securities enforcement and litigation attorney in Ballard Spahr’s Washington, D.C., office. “When you hear someone spouting their personal opinions from the TikTok mountaintop, you should take whatever they say with a hefty grain of salt.”
Several TikTok influencers say that young people should be encouraged to educate themselves financially and that they should not take influencers’ recommendations blindly. “It’s hard to tell what is real since there are so many people out there,” says Mr. Shields, the options trader and TikToker. While Mr. Shields feels confident in his expertise, he says others need to do their own research to make sure they are making solid financial choices for their circumstances. “Wouldn’t you want to research it yourself because it’s your money?” he asks. “I’m still a dude on the internet.”
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Charities, distant relatives and even pets are benefiting from surprise inheritances. They can thank people without children.
Not having children is becoming more common, both among millennials and older people. A July Pew Research Center analysis found that 20% of U.S. adults age 50 and older hadn’t had children.
And many of these people don’t have wills. An AARP survey found half of childless people age 50-plus who live alone have a will, compared with 57% of others that age. Those without wills have less control over what happens to their money, which often ends up in the hands of people who don’t expect it.
This phenomenon of a surprise inheritance is common enough that it has a name: the laughing heir .
“All they do is get the money and go, ‘Ah ha ha, look at that,’ ” said Michael Ettinger , an estate lawyer in New York.
Kelley Gilpin McKeig, a 64-year-old healthcare-industry consultant in Ridgefield, Wash., received a phone call several years ago saying her cousin Nick Caldwell left behind money in a savings account. They hadn’t been in touch for 20 years.
“I thought it was a scam,” she said. “Nobody else in our family had heard that he had passed.”
She hunted down his death certificate and a news article and learned he had died about a year and a half before in a workplace accident.
Caldwell, who was in his 50s, had died without a will. His estate was split among cousins and an uncle. It took about two years for the money to be distributed because of the paperwork and court approval involved. Gilpin McKeig’s share was $2,300.
Afterward, she updated her will to make sure what she has doesn’t go to “just anybody down the line, or cousins I don’t care about.”
Who inherits
There are trillions of dollars at stake as baby boomers age.
Most people leave their money to spouses and children when they die. A 2021 analysis of Federal Reserve survey data found that 82% of heirs’ inheritances came from parents.
People with no children say they want to leave a greater share of their estates to charity, friends and extended family , according to research by two Yale law professors that surveyed 9,000 U.S. adults.
Rebecca Fornwalt, a 33-year-old writer, created a trust after landing a book deal. While her heirs are her parents, her backup heirs include her sister and about a half-dozen close friends. She set aside $15,000 for the care of each of her two dogs.
Susan Lassiter-Lyons , a financial coach in Florence, Ariz., said one childless client is leaving equal interests in her home to her two nephews. Another is leaving her home to a man she has been friends with for a long time.
“She broke his heart years ago and she feels guilted into leaving him property,” Lassiter-Lyons said.
A client who is a former escort estranged from her family is leaving her estate to two friends and to charity.
Lassiter-Lyons, who doesn’t have children, set up a trust for her two dogs should she and her wife die. The pet guardian, her wife’s sister, would live in their house while taking care of the dogs. When the dogs die, she inherits the house.
In the Yale study, people without descendants—children or grandchildren—intended to give 10% of their estates to charity, on average, more than triple the intended amount of those with descendants.
The Jewish Community Foundation of Los Angeles, which manages $1.3 billion of assets, a few years ago added an “heirless donors” section to its website that profiles donors and talks about building a legacy.
“Fifteen years ago, we never talked about child-free donors at all,” said Lew Groner , the foundation’s vice president for marketing.
In the absence of a will, heirs are determined by state law . Assets can wind up in the state’s hands. In New York, for example, $240 million in unclaimed funds over the past 10 years has arrived from estates of the deceased, not including real estate, according to the state comptroller’s office. In California, it is $54.3 million.
Hard questions
Financial advisers say a far bigger concern than who gets what is making sure there is enough money and support for a comfortable old age, because clients without children can’t call on them for help.
“I hope there is something left to leave,” said Stephanie Maxfield, a 43-year-old therapist in southern Colorado. “But if there isn’t, I think that’s OK, too.”
She said she would like to leave something to her partner’s nieces and nephews, as well as animal shelters and domestic-violence shelters. Her best friend is a beneficiary.
Choosing an estate executor and who would handle money and health decisions on your behalf can be difficult when you don’t have children, financial advisers say. Using a promised inheritance as a reward for taking care of you when you are older isn’t a good solution, said Jay Zigmont , an investment adviser focused on childless people.
“Unfortunately, it is relatively common to see family members who are in the will decide to opt for cheaper medical care (or similar decisions) in order to protect what they will be inheriting,” he said in an email.
Kirsten Tompkins, who is from Birmingham, U.K., and works in consulting, along with her husband divided their estate among their dozen nieces and nephews.
Choosing heirs was the easy part. What is hard is figuring out whom to ask for help as she and her husband get older, she said.
“A lot of us are at an age where we are playing that role for our parents,” the 50-year-old said, referring to tasks such as providing tech support and taking parents to medical appointments. “Who is going to do that for us?”
