From cash-rich to big-budgeting, TikTok is filled with ways to build wealth—and more and more people are taking notice.
Financial TikTok, also known as #FinToknow one of the most popular sources of financial information, tips and advice, especially among Gen Z.
With less access to professional advisors and a preference for getting information online, Gen Z is more likely than any other generation to be exposed to financial influencer content on TikTok, YouTube and Instagram, according to a report. CFA Institute.
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“Loud budget” is trending
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In fact, Gen Z is nearly five times more likely to get financial advice, including stock tips, from social media than adults in their 40s or older, according to another study CreditCards.com Report.
But even the best advice can backfire. Here’s what you should know before jumping on the latest money-saving trend.
‘Loud budgeting’ can ‘lead to frustration’
Paul Hoffman, a data analyst at BestBrokers, recently wrote about Harmful FinTok Trends. Before a movie or dinner date, consider that declining those invitations can “lead to frustration and emotional distress,” he says.
Hoffman suggested that perhaps there are better ways to reduce expenses without sacrificing time with the people close to you. “It’s important to find a balance between saving and doing fun activities,” he said.
‘100 envelopes’ technique leads to missed opportunities
More young people are also trying “100 envelopes“Method, it is recommended to save an extra $1 every day for 100 days. On the first day, you will set aside $1, then on the second day you will set aside $2, and so on, so by the end of the 100-day period, you will have Ownership saves over $5,000.
Matt Schulz, chief credit analyst at LendingTree, said it seemed like a good idea with a “relatively low cap.” However, “If there was ever a time when you shouldn’t keep money in a binder, it’s today, when you can earn returns of 4% to 5% or more in these high-yield savings accounts,” he said.
Following a series of rate hikes by the Federal Reserve, interest rates on some of the highest-yielding online savings accounts are now over 5%, well above the rate of inflation, according to Bankrate.com.
In this case, if you had $5,000 in a high-yield savings account earning 5%, you would earn about $250 in interest a year.
“Cash top-up” also loses interest
Another envelope method, called “Cash Stuff advocates dividing your pocket money into envelopes representing monthly expenses, such as groceries and gas, to stay on a budget and get out of debt.
When one envelope runs out of cash, you’ve either finished spending in that category for the month or need to borrow money from another envelope.
However, hoarding cash is not only depriving you of the best returns in decades; Easily stolen and potentially giving up the protections that come with consumer banking.
Whether and how much you are covered in the event of a burglary depends on your home insurance policy, and banks are insured by the FDIC, which provides up to $250,000 of coverage per depositor, per account ownership category.
The “no money” challenge may be difficult to maintain
“Gamification can be a lot of fun,” Ted Rossman, senior industry analyst at Bankrate, recently told CNBC. But like any other quick fix, these challenges can be difficult to sustain over time.
Instead of following the latest extreme fad, he says, “go back to setting a budget and setting expectations.”
Ultimately, there are no shortcuts to good financial habits, most experts say.
“There are no tricks that can teach you self-control, careful spending, or how to keep your balance low,” added Hoffman.
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