Young Americans are flocking to social media for advice on how to handle their money, finding and sharing information on a variety of personal finance topics, and sometimes simply the challenges facing Gen Z and Millennials. I'm just empathizing with the economic challenges.
On TikTok, videos from content creators promoting money-saving strategies like “Budget Out Loud,” “Be Frugal in February,” and the “100 Envelope Challenge” are racking up millions of views. It belies a common complaint from older generations that young Americans don't pay enough. Be careful of notebook issues.
These videos are a departure from traditional personal finance coverage in mainstream media. The tone is generally conversational, irreverent, even brash, but leans toward the lo-fi confessional style adopted by many young people on social media, emphasizing authenticity and even vulnerability.
According to a recent study by Forbes Advisor, approximately 80% of Millennials and Gen Z report seeking financial advice from social media platforms such as TikTok, Instagram, Reddit, and YouTube. In contrast, 35% said they asked family members for such guidance, and only 11% said they consulted a financial advisor.
Not surprisingly, many certified financial planners and other financial professionals have followed this transition and are now posting their own content on social media. However, many content creators also seem to be promoting “get rich quick” schemes or offering money advice that is of little use or is questionable.
“Many of these trends are quirky and creative ways to encourage people to save, but not all of them are healthy. So while it depends on the trend, overall the idea is that people start thinking about saving. That's a good thing,” said Ben McLaughlin, president and chief marketing officer of savings platform Raisin.
Read about the most popular personal finance tips going viral on TikTok and what experts think about them.
What is “loud budgeting”?
Popularized by TikTok creator Lucas Battle, “loud budgeting” refers to the act of openly endorsing time-honored frugal financial principles and publicly pledging to stay within a self-set budget.
“It's not that I don't have enough. It's that I don't want to spend money,” Battle told CBS MoneyWatch.
He also presented a realistic, if slightly tongue-in-cheek scenario to illustrate how to put the concept of budgeting out loud into practice. “When I get an email from a friend saying, “I want to go out.'' You say, “I don't want to spend gas money coming to ask about my ex for three hours.'' ”
Simply put, the core message is: decline invitations to events or activities that cost more than you can afford.
For more financial tips, see Money Management.
While some experts agree that it's wise not to overspend, saying no to all social invitations, as Battle suggests, is the best way to learn budgeting skills. He said that it may not be the best method.
“I think it makes it look cheap in some ways. It's a little bit negative, and it's probably not the best way to date,” economist Michael Sant told CBS MoneyWatch. “Proper budgeting is all about being smart and frugal, and choosing to go to free events instead of expensive ones. I don't think it's very strong to say you can only pay so-and-so on TikTok. , I doubt that large-scale budgeting will become a permanent phenomenon. ”
Another take on this approach comes from Ben Merkley, a personal finance educator and content creator for the budgeting platform YNAB. In contrast to the overtly consumerist concept of “quiet luxury” or flaunting your spending, budgeting out loud means proudly and openly telling others how much you're saving. is to share.
“You're making a loud statement that it's on budget,” he said. “That's like saying, 'I'm not going out to dinner with you because I have to pay $1,500 in rent.' Instead of doing something that sounds fun at the time, it's like getting your priorities very clear. That's what I'm doing.”
Merkley also said she's a fan of the trend because it makes talking about money less taboo.
“I'm really happy that people are thinking more openly about their priorities and talking about money more,” he said.
Merkley believes the drawback is that “99% of the people who say they're going to do this aren't.”
“That's because the need to belong and be accepted is more fundamental to our well-being than the desire for self-actualization or improvement,” he says. “So I don't see this as a solution. Rather, I see it as a cheeky form of restriction.”
What is “Frugal February”?
Another trend trending on TikTok is “Frugal February,” which encourages people to strap in at the beginning of the year. Some TikTok content creators are taking part in a “don't buy” challenge by creating a list of things they won't buy in the second month of the year. Some people are switching to eating out and cooking at home.
Raisin's McLaughlin agrees with this concept. “This is great because it forces you to think about what you want to plan and work on. You can look at your spending and decide what you need and reset the clock on your finances.”
But economist Shant warned against falling into the trap of practicing frugality for one month and spending the rest of the year recklessly.
“Being frugal and being budget conscious is a great strategy, but every month should be a frugal month. This is similar to the idea of 'Dry January.' “If you're going to spend the rest of the year getting drunk, you're going to be in trouble,” he said.
“100 Envelopes” Challenge
Other TikTokers are promoting 100-day savings challenges that require people to deposit various amounts into paper or plastic envelopes, starting with $1 and going up to $100 on the last day of the challenge. This can save you up to $5,050 overall.
A video by creator Grace Marie explaining the challenge has been viewed 38 million times on TikTok. Many other videos show the same technique.
While it's a convenient way to save money, it does have some drawbacks. Most notably, envelopes stuffed with cash don't earn interest like money you put in a savings account or invest in a CD. And with more retailers no longer accepting cash, that may not be practical.
“It's too old,” Santo says. “I don't think people should carry around that much cash.”
YNAB's Merkley praised the intention, but noted that saving without a clear financial goal can be demotivating. He recommends clearly identifying expenses you want to save on, such as car payments or eating out.
McLaughlin added that savings accounts are a much better investment vehicle than envelopes.
“Access is easy and interest rates are high. Now is the perfect time to open, earn 5% or more interest, and watch your money grow over time,” he said. “It’s guaranteed money and it’s very safe.”
