At its best, social media helps expose young people to advice on how to save money or climb out of a mountain of credit card debt. But these platforms can also allow for the quick spread of financial misinformation.
When it comes to personal finances, social media has become “a blessing and a curse,” Brian Walsh, certified financial planner and head of advice and planning at SoFi, tells CNBC Make It.Â
“It’s a way for younger people, and actually anyone of any age, to get exposed to financial knowledge in bite-sized pieces when they need it, which can be extremely powerful,” he says. “But the curse of social media is really that there’s no barrier to entry. And it can become really hard for people to know what’s a reliable piece of financial information versus something that, quite frankly, is going to get them in trouble.”
As social media becomes an increasingly frequent source for money advice, it’s important to be able to distinguish between sound financial guidance and a potential scam.
Before following advice from a financial influencer, Walsh recommends looking for these three warning signs to help decide whether their tips are trustworthy.Â
1. Their advice sounds too good to be true
Alarm bells should go off in your mind when an influencer promotes any kind of get-rich-quick plan. “If it sounds too good to be true, it most likely is,” Walsh says.
“There are no quick fixes, overnight success stories, get-rich-quick schemes that are reputable for personal finances,” he says. “So when I see that, I say run away, because it is most likely going to be something that involves more risk than reward.”
2. They promote extremes and absolutes
Financial influencers who “take extreme stances or speak in absolutes on financial topics” also raise red flags to Walsh, particularly when they talk about debt.
While some influencers recommend paying off all debt except your mortgage before beginning to build an emergency fund or invest, Walsh says that “not all debt outside a…
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