‘Finfluencers’ are on the rise: why you should be wary of financial advice on social media
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There are good conversations to be had around financial literacy and the promotion of financial responsibility. The problem is that opportunists are everywhere and consumers should arm themselves with the knowledge of what constitutes good advice.
On social media, some of the information and opinions that consumers receive from online forums will be bad, but some of it will be good. But, it's good to remember that a large following doesn't equal credibility.
Many investors, whether starting their journey or heading into retirement, fall prey to social media financial advice because they do not have a solid financial plan.
So, how should a digitally-oriented generation attune themselves to the complexities of personal financial management?
A good, independent financial adviser will explore consumers’ unique set of circumstances and implement a long-term investment strategy to help them reach their financial goals.
A financial adviser is a central part of any good financial plan and every person can benefit from having an adviser as a partner on their financial journey because while most people are emotional about their own money, a financial adviser will be rational.
In an age of social media influencers, who can people really trust when it comes to securing their financial future?
The need to distinguish between social media influencer and financial adviser
There are many wonderful lessons that can be provided to you on social media platforms. Want to learn how to do the latest viral dance moves? That’s the place to do it. Want to see how to prepare some simple and delicious meals? Watch a few videos and have a go.
However, when it comes to your finances, Janine Horn, a financial adviser at Momentum, says even billions of views doesn’t necessarily equal good advice.
“Social media influencers are a powerful force in today’s economic engine, but there are dangers to seeking financial advice from someone who may not have an understanding of your personal situation, the country you live in, or even the financial challenges that are unique to your life.”
Horn says this has been backed up by the fact that a leading social media platform has recently banned its users from advertising financial services in a move to curb scams and poor financial advice.
This is not to say social media can’t prompt younger generations to start thinking critically about their money. “There are good conversations to be had around financial literacy and the promotion of financial responsibility. The problem is that opportunists are everywhere and consumers should arm themselves with the knowledge of what constitutes good advice,” says Horn.
So, how should a younger, more digitally-oriented generation attune themselves to the complexities of personal financial management?
Horn says, “Where you are in your life can guide you towards your most important financial goals, to grow your wealth and secure financial freedom. The question is, what are the most suitable investment options in South Africa for your unique needs?”
To provide some structure to your approach, Horn offers some advice on how young people should approach financial management for different stages of their lives:
Starting a career
When you’re young, starting out in life and finally earning a living is exciting. “The sooner you start saving and investing your money, the sooner you get a head start on your journey to financial success. It's the best time to set up that much-needed emergency fund so you have a financial safety net, save for your short- and long-term dreams and goals, start a tax-free savings account, and start investing for your retirement to take advantage of compound growth,” advises Horn.
Starting a family
Making your family circle bigger costs money. Horn says each family's journey is different, whether you need to save for your child's education, put money away for that family holiday or a bigger car through flexible investment options, or invest extra for a more comfortable retirement.
“When it comes to your loved ones, you can’t afford to leave anything to chance. It's time you started looking at the bigger picture, because now, you have more than just yourself to think about. You can’t predict the future, but you can rest easy knowing they’ll be financially secure, no matter what life throws your way,” says Horn.
Planning for your tomorrow
Everyone's journey is unique, but some goals, like a cushy retirement and growing your wealth, are important to everyone. Horn admits that many South Africans have slowed or stopped contributing to their retirement savings due to the ongoing effects of Covid-19.
“The current economic climate has led some people to consider dipping into their retirement funds to access capital. But that shouldn’t stop you from finding a way to invest for your retirement as early as possible. You'll be able to take advantage of the time you have as well as the power of compound interest. Your future self will thank you,” advises Horn.
Growing your wealth
Do you want to create a better future for yourself and your family? Or do you simply want to leave the world a better place? Whatever your reason for growing your money, Horn advises you to aim high but be realistic in the process.
“The longer your money is invested, the more it will benefit from compounding – the power of growth on growth. Often the higher the risk that you are willing to take, the higher the potential growth of your investment.”
Get influenced by the right advice
Wherever you are on your financial journey to success, Horn says there is plenty of time to make the right decision and do it early enough to ensure your future is secured. “The truth is that it is not easy to always make the right financial decisions, but there are advisers out there who know what they’re doing and can apply their knowledge to your unique situation and goals.”
Horn advises young people seeking financial clarity to find the right advice and to avoid blindly trusting popular voices on the Internet. “A financial adviser will coach you on the best way to achieve your financial goals, help you choose the best investment strategy and avoid costly mistakes.”