Everywhere we look at the moment, there’s more bad financial news: inflation reached a 40-year high in 2022, energy bills are sky-rocketing and we’re facing what could be the longest recession on record. It’s no wonder, then, that we’re all looking for new ways to save money – and social media is filled with people promising to teach us how to do just that.
Financial influencers, also known as ‘finfluencers’, make online content teaching people how to manage their money. This content is particularly big on TikTok, but it’s not just Gen Z that are paying attention — new research found that one in five people between the ages of 45 and 54 are more likely to get financial information from social media since the cost of living crisis began*.
Understanding your finances can be intimidating, and social media can help to make it more accessible, but it’s important to make sure you’re getting your information from reliable sources.
“The risk with finfluencers is that anyone can set themselves up as one,” says Sarah Coles, personal finance analyst at Hargreaves Lansdown. “You don’t need any skills or experience, you can just launch yourself into telling people what to do with their money. In fact, ironically, the fact they’re unregulated means they don’t have to follow the regulator’s rules about what they can publish, so they can say what they like.”
To help you separate fact from fiction, we asked three experts for their thoughts on some of the most common money tips that are given on social media. Here’s what they said.
Budgeting: what is ‘cash stuffing’?
The cost of filling our fridges and heating our homes is incredibly high at the moment, so creating a budget and sticking to it can help you to plan out how you’ll cover your bills and other expenses. One popular method of budgeting that’s often recommended on social media is ‘cash stuffing’ – but what is it and does it work?
Sarah Coles explains: “Cash stuffing is where you withdraw your salary on pay day and put it into pretty drawers or some sort of filing system, with a specific amount to spend on each part of your budget. For example, one drawer could be for groceries, another for transport and one for leisure.
“The idea is that it helps you to know how much money you have left — and cuts the risk of overspending. This kind of budgeting can be incredibly useful, but having an entire month’s salary sitting around the house is a really dangerous idea. It would be far better to do this through your current account or a budgeting app instead.”
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Investing: should I invest in cryptocurrency?
Most of us are aware of how important it is to have some money in an easy access account. However, there are limitations to keeping all your cash in a savings account; the current rate of inflation is so high that even savings accounts with a decent interest rate can’t match it, so investing your money can be a great way to help it grow.
One form of investing that’s touted a lot on social media are cryptocurrencies. These are digital currencies that saw a surge in popularity during the pandemic, with Bitcoin being the most well-known. Many celebrities have advertised cryptocurrency over the last few years, with Kim Kardashian having to pay a £1.12m fine in October for failing to disclose that she had been paid for endorsing a currency called EthereumMax.
Like with any investment, the value of cryptocurrencies have fluctuated over the years with some headline-hitting highs but also some terrible lows. Alice Haine, personal finance analyst for Bestinvest, advises careful consideration before you think of investing.
“Over the past year, crypto values have dropped significantly, so any investor considering adding cryptocurrencies to their portfolio should be aware of two things: one, it is a hugely volatile market with the price often extremely unpredictable and, two, these are unregulated assets that are not covered under the Financial Services Compensation Scheme.” This is a scheme that provides protects customers and investors by providing compensation if a company fails.
“If you buy an unregulated asset, it means you are effectively on your own if anything goes wrong,” says Alice Haine. “You only have to look at the fallout from the recent collapse of crypto exchange FTX, with clients unable to withdraw their funds, to see the risks involved.”
If you do decide to invest in cryptocurrency, Alice advises making it part of a diverse portfolio. “Only allocate a tiny proportion of your investment portfolio to this asset class — ideally an amount you can afford to lose — with the rest directed towards regulated mainstream investments, such as equity and bond funds or investment trusts where you have some redress if things go horribly wrong.”
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Debt: who can I trust for debt advice?
Credit card debt has risen by 13% in the last year, the fastest rate of growth in 17 years**, and more advertisements from organisations promising to help ‘write off your debt’ have been popping up on social media feeds and search engines. However, many of these organisations are not regulated by the Financial Conduct Authority (FCA) and some charge for the advice they offer, often despite it initially appearing to be free.
“There are organisations which use branding and imagery designed to mimic more reputable debt firms, while in reality they are working for fee-charging providers of products like individual voluntary arrangements (IVAs),” says Sue Anderson, head of media at StepChange.
An IVA is a formal and legally binding agreement between you and your creditors to pay back your debts over a period of time and the fees charged for them are high. “Although IVAs can be a good product in the right circumstances, they aren’t right for everyone, and these unregulated organisations can drive people into ‘set-up-to-fail’ debt plans which can make them thousands of pounds worse off than they started.”
These adverts often use branding and colours that look similar to reputable debt charities like StepChange or Citizens Advice. Last January, a company called WiseoldMary placed adverts on Facebook promising to write off debt and using a logo similar to the government crest. This advert was banned by the Advertising Standards Authority because it did not make it clear that they passed on leads to a third party and did not clearly state the potential fees and risks.
“These imitators are steering people away from the comprehensive, impartial debt advice they’re seeking and towards profit-making firms motivated by commission,” Sue Anderson says. “If you’re unsure of where to get help, make sure any debt advice organisation you go to is free and is regulated by the FCA.”
How to find trusted financial advice
One thing to remember is that just because a post on social media has high engagement, it doesn’t mean that it’s from a trusted source.
“Part of the problem is that when you see someone has a lot of views and likes, it’s easy to assume they must be experts,’ says Sarah Coles. “In reality, it just means they’ve made a video that has entertained people – it tells you nothing about the tips and advice itself.”
If you are unsure whether to trust the advice you have read, speak to someone from a recognised organisation such as Citizens Advice, StepChange or MoneyHelper. Don’t be afraid to ask for a financial experts for their qualifications, which should include:
- Have a Level 4 or above of the Qualifications and Credit Framework;
- Have a Statement of Professional Standing (SPS), meaning that they have signed up to a code of ethics and completed 35 hours of professional training a year;
- Be FCA approved, which you can check here. The same goes for organisations, so make sure you check the register before following any financial advice.
A financial expert will not hide their qualifications — you should be able to find them listed on their website or in their social media bio.
*Westfield
**Hargreaves Lansdown
