Is social media leading your young employees astray over their personal finances?

Social media platforms such as Instagram and TikTok can be a place of connection, learning, and fun. By enabling people to access videos, images and information on virtually any subject imaginable, there is no doubt that these apps can be enriching.

Despite these benefits, social media doesn’t come without its drawbacks. In recent years, more and more young people under the age of 25 have begun to turn to the platforms for financial education and advice. However, shunning professional advice and instead paying attention to unregulated “influencers” could cause untold damage to their financial wellbeing.

One solution that could help is for employers to support their young employees to understand more about the fundamentals of personal finance. Nick Perry, Employee Benefits Partner at Secondsight, shares his thoughts about how you can help your workforce to make more informed choices about their finances.

Easy access and fear of missing out is leading to more young people taking financial advice from social media

It’s perhaps no surprise that the short, snappy content that social media influencers are sharing is so appealing to younger generations. FTAdviser reports that more than half of UK adults who have any financial products consider traditional financial advice to be just for the wealthy.

Moreover, 60% of millennials and 57% of Gen Z in the UK believe that they can find good financial advice online, while 44% of Gen Z believe that they can find good financial advice on social media. A further survey reported by FTAdviser found that only 15% of 18 – 24-year-old investors had sought advice from a finance professional.

Additionally, the fear of missing out (commonly referred to as “FOMO”) is another reason social media could be so influential for younger generations. Business Insider reports that 40% of Gen Z investors in the US, Canada, and UK said this was a major factor in their decision to start investing.

Of course, FOMO isn’t exclusive to social media. Herd mentality is a common cognitive bias in investing, but the collaborative nature of social media can intensify this feeling.

The brief popularity of the GameStop stock in early 2021, following a campaign on Reddit, is a useful example of this. Many individuals who bought shares during the hysteria lost money when its share price fell shortly afterwards.

Unregulated social media influencers could encourage young investors to make unsuitable financial decisions

It’s concerning to see so many young people basing important financial and investing decisions on often inaccurate information from social media.

Many of the influencers sharing this content on platforms like TikTok and Instagram are unregulated and unqualified to give financial advice. Those who are acting on such advice could risk losing money or damaging their ability to meet their long-term financial goals.

Consider trends such as the rise in popularity of cryptocurrency investments. Cryptocurrency lacks the level of regulation that more established asset classes have, and it is not covered by consumer protection laws.

So, without a thorough understanding of exactly what they are investing in, including the level of risk they are taking on their money, young people could cause long-term damage to their financial wellbeing.

Easily accessible educational sessions could help to support younger employees’ financial wellbeing

The PwC 2023 Employee Financial Wellbeing Survey found that 57% of employees cite money worries as the top cause of stress in their lives. In addition, the survey found that 74% of employees seek financial help during significant life events or crises.

A financial education programme could help employees to make more informed decisions about their finances. This in turn can help them to lower stress, improve their financial resilience, and make meaningful progress towards their financial goals.

An effective way to begin is to create short, pre-recorded webinars that can be shared internally. This will enable employees to engage with the content at a convenient time for them.

Such webinars could cover subjects such as:

• Pensions
• Savings
• Understanding credit and borrowing
• Mortgages and buying your first home
• Improving your credit score
• ISAs
• Investments
• Financial protection
• Estate planning.

By making the sessions easy to engage with and relevant to your employees, you can provide a trusted source of reliable information. Of course, another important aspect of this is to educate them on the different types of financial advice, and how to discern regulated advice from unregulated guidance.

Get in touch

If you’d like to learn more about how we can help you to support your employees’ financial wellbeing, please get in touch.

Email info@second-sight.com or call us on 0330 332 7143.

Please note

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Crypto assets are not regulated financial products so please be aware that trading them carries a considerable amount of risk for your capital. Cryptocurrencies are also not covered by existing consumer protection laws.

Your home may be repossessed if you do not keep up the repayments on your mortgage.

The Financial Conduct Authority does not regulate taxation and trust advice.

Information correct as of 12th September 2023.