How to check the financial advice you're receiving online.
Find Cameron on TikTok and Cameron on Instagram
There are people on social media that want to make money from your financial mistakes – so how do you know if what you’re hearing is actually true?
As someone who has spent countless hours scrolling through social media, I know how easy it is to come across financial advice that seems too good to be true. With 31% of young people using social media for financial guidance, it's crucial to be able to discern between genuine advice and misleading information. Before acting on anything someone tells you, think to yourself: Is it CAP?
Credibility
The first thing to consider is the credibility of the person giving the advice. Is this person credible and trustworthy? Take a moment to go through their account. Do they show a long history of genuine financial advice and guidance, or are they just focused on engagement and clicks? A credible source will have a consistent track record of providing valuable and accurate information. They will also be transparent about their qualifications and experience in the financial field. If you notice that their content is primarily geared towards gaining followers and likes, it's a red flag.
Research supports the importance of credibility in financial advice. One study found that the perceived usefulness and compatibility of social media for personal finance significantly influence users' trust and satisfaction. This means that credible sources are more likely to provide useful and compatible advice that aligns with your financial goals.
Agenda
Next, consider the person's agenda. What do they have to gain by telling you this information? Are they genuinely trying to educate you, or is it just a front for something they're trying to sell? It's essential to be aware of any potential conflicts of interest. For example, if someone is promoting a particular investment or financial product, they might be receiving a commission or other incentives. Always question the motives behind the advice and whether it aligns with your best interests.
The agenda behind financial advice on social media can often be hidden. According to one study from 2024, social media influencers may have underlying motives that are not immediately apparent. This could include promoting products or services for financial gain rather than providing unbiased advice.
Proof
Lastly, look for proof. Does this person provide any evidence to support their claims? Or are they just making bold statements with no receipts? A trustworthy source will back up their advice with data, research, and real-life examples. They will also be open to answering questions and providing additional information if needed. On the other hand, if someone is only presenting you with bold success claims without any evidence, it's a sign that their advice might not be reliable.
The role of proof in financial advice is critical. A systematic review by the Social Science Research Network (SSRN) highlighted the importance of evidence-based financial literacy. The review found that individuals who rely on data-driven advice are more likely to achieve financial satisfaction and well-being.
If a person's claims sound too good to be true, they almost certainly are. It's essential to approach financial advice on social media with a healthy dose of skepticism. Remember, there are people out there who want to profit from your financial mistakes, so it's crucial to be vigilant and critical of the information you come across.
The National Literacy Trust, in partnership with Experian, hopes that CAP will help "stop the cap" if and when you're receiving financial guidance online. By keeping these three principles in mind – Credibility, Agenda, and Proof – you can better navigate the world of social media financial advice and make more informed decisions about your money.
In conclusion, while social media can be a valuable resource for financial guidance, it's essential to approach it with caution. Always question the credibility of the source, consider their agenda, and look for proof to support their claims. By doing so, you can protect yourself from misleading information and make smarter financial decisions. Remember, your financial well-being is too important to leave in the hands of unverified social media influencers. Stay informed, stay critical, and always think: Is it CAP?
