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Gen Z prefers TikTok and YouTube to financial advisors—but the advice they're getting 'may be totally inappropriate,' says financial psychologist

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If your friends' latest poolside Instagram posts from the French Riviera have you feeling lousy about your money situation, you're not alone. Nearly half of Gen Z social media users (those aged 18 to 25) say they've felt negatively about their finances after seeing posts from others, according to a recent survey from Bankrate.

Frankly, it's kind of by design; 46% of Gen Zers in Bankrate's survey admitted to posting things to make themselves look more successful in the eyes of their followers. "And those numbers are likely higher," says Bankrate analyst Sarah Foster, pointing out that 62% of all survey participants said they thought people they followed did as much.

For people you know in real life, it may be easy to tell where their social media profiles diverge from reality. But when it comes to influencers, that line can be much harder to spot. What's more, many of them are dispensing financial advice. Gen Z investors say they're more likely to get financial advice from TikTok (34%) and YouTube (33%) than from a financial advisor (24%), according to a survey from marketing firm Vericast.

If you follow money advice you find on social media out of a need to keep up with the virtual Joneses, you could find yourself in big trouble, says Brad Klontz, a certified financial planner and financial psychology professor at Creighton University. "Young people are listening to financial advice that may be totally inappropriate," he says.

Here's why experts say you're likely to believe the advice you see on social media, and why you'd be wise to distrust it.

Why you believe influencers: 'It's the way our brain is wired'

Everyone knows, to some extent, that what you're seeing of other people's lives online isn't the real thing. "I like to think of social media as a scrapbook filled with the best parts of people's lives," says Foster. "That can result in your comparing yourself to an unrealistic portrayal of someone else's life."

When someone you admire talks directly to you through the camera, "something really weird happens," says Klontz: a phenomenon known as "parasocial interaction."

"If I were to gaze into your eyes and hear you talk and you're looking into my eyes, it creates an intimate connection and a deep sense of trust," he says. "It's the way our brain is wired. For 99.9% of human history, if you had that gaze it was intimate. Your brain doesn't know it's unidirectional. It creates a false relationship."

Combine that sense of trust with feelings of inadequacy about money, and you can create a situation where people are willing to abandon some of their skepticism over advice they're seeing online, says Foster.

"You saw that during the meme stock phenomenon where people were posting huge returns," she says. "People may not have stopped to think critically about what they were seeing on social media."

You can't always trust what you see on social media

Approach any advice you find online with a critical eye, experts say. For one thing, someone portraying themselves as successful or knowledgeable about finance may not be giving you the whole story, says Foster.

"You may have seen everyone taking vacations this summer, but you don't know if someone went deeper into debt to pay for it," she says. "Realizing that you don't know the full story is really important."

Financial advice is rarely one-size-fits-all, which is why you won't find many financial advisors giving tips on social media, says Klontz. "Almost no one who gets on here is an actual pro because they're too afraid," he says. "You see posts telling you what stock to buy, but there are reasons a pro won't do that. If I give that advice, I might change my mind tomorrow, and then where are you? I don't even know if you should be buying stock at all."

When you see intriguing financial advice on social media, ask yourself if this strategy fits in with your financial plan. If someone is flogging stocks or crypto trades meant to make quick gains, for instance, that might not jibe with your plans to invest toward long-term goals, such as retirement.

If an idea still sounds like it may align with your goals, start doing some additional research, says Klontz.

"Vet this person who is giving the advice. What's their background? What are their credentials?" he says. "Then run the strategy or technique by multiple people, including a credentialed expert and someone who doesn't make money selling that technique."

Be extra wary of anyone hoping to sell you something by flashing their car collection or showing you trades aboard a yacht. "This is an old sales technique. These guys are getting rich, but not from day-trading. It's from selling you a course," Klontz says. "Studies show that actual multimillionaires downplay their wealth."

"People who put on lavish displays of wealth are trying to manipulate you," he adds. "Plain and simple."

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