Contributed by: Josh Golden
Edited by: Kelsey Arvai, CFP®, MBA
The Emerging Wealth Series
Iris Hayes and Josh Golden join The Center for the summer. This series is a summer intern-led exploration of the values, behaviors, and trends shaping the future of wealth.
There is nothing that winds me down better than scrolling through my TikTok for you page (FYP) in my free time. Watching updates on pop culture, compiling athlete highlights, and discovering new artists are some of my favorite videos to watch. What started as a lighthearted entertainment app is now a prominent financial education resource for investment strategies, budgeting, and personal finance. TikTok's greatest strength lies in the appeal of short-form video. The ability to access knowledge so readily from these videos draws in a large number of viewers on financial TikTok (FinTok).
In personal financial education, these creators do a fantastic job of taking complicated financial information, simplifying it, and presenting it in an entertaining way. Therefore, it makes it so everyone can learn about how finance works and how it will affect their life.
For investment strategy focused videos, creators produce videos on what characteristics to look for when creating an investment portfolio. These videos make it easier for younger viewers to understand different investment tools, such as stocks, bonds, and ETFs. With a variety of "FinTok" videos readily available, TikTok is shaping the minds and habits of the new generation. TikTok is revolutionizing how the new generation learns about important financial topics.
Misinformation spreads like wildfire, especially through TikTok. When exploring FinTok, it is necessary to be aware of whose advice you trust. Anyone can seem like an expert. A simple way to verify credibility is to look them up on LinkedIn or any financial institution website. Utilize resources like FINRA's BrokerCheck or the SEC's Investment Adviser Public Disclosure (IAPD) database to research employment history, qualifications, etc.
Additionally, misinformation spreads by creators promoting their speculations. This is a potential danger for young professionals because these investments shown in the videos are highly volatile. These creators often advertise their investments with the intention of leveraging their influence to encourage their audience to invest, which in turn causes the creators' initial investment to increase in value. The creator then sells their shares and tanks the investment. What can we learn from this? Do not follow investment advice from someone who is not licensed or has something to gain from you investing in the same investment as they do. The combination of FinTok's insights and professional guidance can provide a solid foundation of knowledge for young professionals. The sky's the limit for learning, but you need to be aware of whose resources you are learning from.
Once a niche on TikTok, FinTok has emerged as one of the most relevant financial resources for the new generation, given its accessibility. Financial professionals are creating content to answer the basic money-related questions that most people hire others to answer. Professionals in economics and finance create simplified videos based on trending topics. Many young viewers rely on these videos more than an article by a news company. The reason for this is simple: entertaining and easily digestible videos are a more realistic way for the new generation to comprehend complex and critical information quickly. What's great about TikTok is its algorithm. Based on users' searches and watch history, it generates your FYP based on those searches. So, if you look up a video on stocks, your FYP will show more videos on stocks and other information correlated to stocks. Ultimately, the short and engaging style of videos makes the intricate financial information easier to retain.
While recognizing that TikTok does not replace the need to read from credible news sources and engage with professionally published content, TikTok offers a gateway to more opportunities for beginners. Across these videos, the creators make investing seem less intimidating by defining the characteristics that people often worry about when investing. For some, hearing creators share their personal journeys and thought processes helps shift their mindset from fear to opportunity. Beyond investing, trends and viral challenges shape how young professionals think. The term "girl math" was coined to poke fun at obscure logic to rationalize spending habits. Although this trend may seem silly, it has a deeper meaning. Girl math reveals realistic and entertaining views on the psychology of spending. Ultimately, trends like these help people become more comfortable talking about their finances.
All in all, TikTok has an immediate impact on the next generation of investors and young professionals. The most significant benefit of FinTok is its extensive range of simplified financial explanations, presented in a concise video format. Looking into the risks of FinTok, it is important to be aware of whose content you trust. Young professionals should engage with professionals in the financial industry, not random market speculators. FinTok continues to evolve as a reliable resource for young professionals to learn about the complexities of the financial world. Could TikTok be a major networking tool for finance? Only time will tell.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the author and not necessarily those of Raymond James.
Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.