TikTok and Instagram have made personal finance a breeze: the trick is to find the good stuff

Nathan Kennedy adjusts his studio where he creates content about finance for his social media channels, in Hamilton, Ontario, on March 17th.Christopher Katsarov/The Globe and Mail

Delivering both fun and useful money tips in a 60-second video is a challenging task. But that’s exactly what Nathan Kennedy at TikTok does for a living.

The 25-year-old former PepsiCo area sales leader in Hamilton has nearly 411,000 followers on TikTok and 32,700 audiences on Instagram. He does not promote cryptocurrency schemes or brag about his quick victory in the stock market to attract clicks and likes.

Alternatively, visitors to Mr. Kennedy’s feeds will find infographics on topics like salary negotiation, index investing, and even a few clips about something as cute as the Canadian tax system. In one of the videos, Mr. Kennedy debunked the common misconception that earning $49,000 a year is better than earning $50,000. But he uses the popular TikTok format to have a conversation with himself. Mr. Kennedy in a red shirt explained to Mr. Kennedy in a gray shirt that the first $49,020 of income is taxed at the federal rate of 15 percent. It’s just that every dollar above that limit — up to $98,040 — is taxed at 20.5 percent (using 2021 tax rates).

While the video doesn’t capture every nuance about how Canada’s federal tax brackets work, it’s an example of how social media content can make the basics of financial literacy not only affordable but fun to watch. Bloggers and YouTubers have been creating financial and friendly content since long before the pandemic. But financial advice on platforms like TikTok and Instagram exploded when COVID-19 restrictions and a 21-month stock market rally drew dozens of millennials and Generation Z novices to the financial markets and searched for money management information online.

Of course, a lot of financial advice on social media is factually wrong or downright fraudulent. But some successful financial influencers, or ultimate influencers, see themselves as educators who can speak to individuals and life challenges that are often neglected by traditional sources.

“The whole goal is to get as many people as possible to believe that funding is as great as possible,” said Haley Sacks, a New York-based financial pop star known as MrsDowJones. To do this, new influencers are opening new horizons regarding how financial information is packaged.

For example, Ms. Sachs, who has more than 243,000 followers on Instagram and more than 184,000 of them on TikTok, has a video where she gives brief financial tips while also putting foundation on her face and applying eye shadow.

She said the strategy was to take advantage of TikTok’s viral trend for brief makeup tutorials. She wanted to reach people who would not naturally gravitate toward financial content but might become interested if it was presented in a linkable format.

Finfluencers also addresses issues that the broader industry ignores. Mental health and LGBTQ identity are key themes for 27-year-old Ellyce Fulmore, who has 497,000 followers on TikTok and 13,400 followers on Instagram. Calgary, who took $35,000 in student loans and high-interest debt before the pandemic, said her ADHD makes it difficult to budget with a spreadsheet and easy to spend impulsively. To help herself stay on track financially, she is now managing her cash flow by funneling money into various accounts for long-term and short-term savings and using a rechargeable Visa prepaid card.

Although Ms. Fullmore admits that not everyone has ADHD in the same way, her audience has been “very receptive” to the content as she shares financial strategies that have worked for her, she said.

Having an affair with another woman affected Ms. Fullmore financially.

“When my girlfriend and I were looking for a place to rent, we had a lot of difficulties finding one,” she recalls. The potential landlords seemed uneasy around them and insisted on referring to Ms. Fullmore and her partner as “friends”, even though they made it clear that they were a married couple.

It was a situation that Ms. Fullmore said she had never experienced when she was hiring and dating men before coming to terms with her gay identity. In the end, Ms. Fullmore and her current partner had to increase their rental budget to find a place where they could live together.

“We thought people would probably take us more seriously if we were renting somewhere more expensive,” she said.

Ms. Vollmore is now writing a book on how personal experiences of discrimination affect personal finance.

Social media also addresses working-class financial questions that advisors may not hear much from clients of wealthier professionals.

However, finding your way to financially beneficial content on social media is a challenge in a space that is still riddled with seriously bad tips and tricks.

Videos promoting risky options trading are for inexperienced investors or where influencers brag about owning large sums of money in cryptocurrencies, which are much more volatile than stocks. As well as the so-called pump and dump plans, where fraudsters buy an asset at a cheap price and promote it on social media to raise its price only to get rid of it suddenly and take advantage of the profits.

Britt Banerjee, a Toronto-based personal financial commentator who chairs the Canadian Foundation for Advancing Investor Rights, better known as FAIR, said the lack of regulation around financial information on social media means there are few remedies for fraud victims or protections for new investors. Canada. (He did not speak to The Globe and Mail as a spokesperson for the organization.)

“We know that people tend to be drawn to opinions that really affirm what they might believe and we don’t know what their level of financial literacy is,” said Mr. Banerjee, who has his own YouTube channel of more than 100,000 subscribers. “They may find themselves more convinced of some strategies that may not be appropriate.”

Listen to this stress-testing episode on investing in cryptocurrency

Opinion: Most online personal finance tips are better than those offered by existing financial institutions

So how do beginners filter bad financial content into ugly and find the best that influencers have to offer?

To start, keep in mind that the largest social media accounts aren’t necessarily the most credible, said Ben Felix, a portfolio manager in Ottawa at PWL Capital.

While Mr. Felix’s popular YouTube channel, Common Sense Investing, has 248,000 subscribers, success on social media often involves promoting unlikely get-rich-quick schemes.

“There are personal financial channels on YouTube, not to mention TikTok, that have a lot more subscribers than me, but they give terrible advice,” he said.

Another red flag: Mr. Felix said videos asking you to buy a specific stock or crypto symbol.

He said, “You don’t know what happens behind the scenes” regarding any compensation or incentives that might have been offered to influencers for promoting the asset to their followers.

There are also more subtle issues of conflict of interest around corporate sponsorship. Lucrative brand ambassador contracts are a major source of revenue for social media professionals.

While many of these pairings are done with complete transparency and include sound financial products, it still highlights the fact that many social media gurus aren’t completely independent financial commentators.

All of the influencers interviewed by The Globe said they are very selective about the brands they endorse, adding that they reject the vast majority of companies’ offers and limit themselves to products they actually use and like or have done extensive research.

Ms. Sachs, who also offers financial literacy courses, said her online platform, Finance Is Cool, is now her main business source.

“It gives me the ability to say no” to endorse the brand, she said.

Mr Banerjee said Finfluencers who take the long view have an incentive to maintain their audience’s trust. He added that even with the best of intentions, they may not always fully understand the financial products they decide to support.

Ultimately, Mr. Banerjee would like to see some light regulatory oversight provided for influencer content. He added that the rules should offer some guarantees for consumers without being so restrictive that they end up shutting down the online financial conversation.

In general, it’s a good idea to validate every bit of financial information you collect from social media, Kennedy said.

“You have to do more than just be on TikTok,” he said. “You have to do your own due diligence.”

Be smart with your money. Get the latest investment insights delivered straight to your inbox three times a week, with Globe Investor’s newsletter. Register today.

Leave a Comment