FinTok: The good, bad and straight-up wrong
In just a few years, TikTok has become one of the world’s most influential, and sometimes controversial, social media platforms.
For its 1.5 billion monthly active users, it’s a go-to source of endless entertainment – and also education.
But should you be following the advice of influencers on financial TikTok, aka FinTok, and other platforms such as Instagram?
As the reach of these “finfluencers” continues to grow, and as more and more Canadians turn to social media for financial education, we’ll take a dive into whether their advice is helping us increase our money savvy or leading us to make potentially perilous decisions.
We wanted to distinguish what type of FinTok content works and what doesn’t – and highlight any information that is straight-up false.
So, Tangerine invited 1,000 Canadians who have followed TikTok for financial advice to weigh in.
The results? Well, of those we surveyed:
- 89% say FinTok has helped increase their financial literacy.
- About 60% follow investing advice. About 53% follow budgeting advice. (“Loud budgeting“ was the highest rated budgeting tip, according to our respondents.)
- Roughly 26% said they experienced some positive results after following investing advice on TikTok. Almost 13% reported negative results.
- Of those who had positive experiences with FinTok in general, almost 38% say the advice helped them earn or save $500 or less; 43% netted between $501 and $2,000; and just under 19% earned more than $2,000.
- Of those who had negative experiences with FinTok, nearly 60% say they lost $500 or less; 27% lost between $501 and $2,000; and about 14% lost more than $2,000.
Those are just some highlights from our findings, which illustrate both the pitfalls and promise of FinTok. While it seems there are plenty of influencers who provide decent saving and investing tips, finding the right advice to meet your own financial needs can be a challenge.
If you’re like the 76% of our survey respondents at the beginning of their financial and investing journey, you’re probably not alone in wondering who you can trust for financial information.
How do you separate good financial advice from bad?
Online influencers are doling out advice to the masses, not just to you, so it’s important to tread carefully.
First, make sure that the advice you’re following is relevant to your local laws and situation. Some “finfluencers” have been charged in the past for failing to disclose conflicts of interest, or promoting pump-and-dump investment schemes, so make sure you do some due diligence before diving into an opportunity that may seem too good to be true.
Our survey showed that 89% of respondents felt that the advice they received from TikTok helped to improve their financial literacy. Still, some healthy skepticism can prevent you from making costly mistakes.
There are numerous scams circulating on social media, especially related to finances. It helps to know the red flags, including:
🚨 Get-rich-quick schemes
🚨 Hard sells on certain investment products that guarantee returns
🚨 Discussions on how to not pay taxes
🚨 Demands for you to pay money up front
“Trust your gut. If something seems off, or it sounds too good to be true, it probably is. When it comes to financial scams, that’s one of the biggest red flags,” says Lora Paglia, Tangerine's Chief Risk Officer.
“Be extra careful if you’re being asked to send money, or you’re promised that free cash is coming your way. You may be falling for a scam, or even participating in something illegal.”
Aside from viewing advice critically, it’s also important to consider what credentials the influencers have, and make sure other legitimate sources corroborate their advice.
However, of those we surveyed, 48% say they didn’t review the credentials of influencers before following their advice. This is a critical step.
For example, if you want to learn more about investing, you may want to follow someone with credentials worthy of giving such advice. That might be a Certified Financial Planner® (CFP), Chartered Investment Manager (CIM®), or Personal Financial Planner (PFP®).
At Tangerine, we carefully select the financial influencers we work with, and primarily engage them to share general personal finance and lifestyle tips on topics such as budgeting, rather than specific investment advice like stock market picks.
It’s a good idea to try for a healthy balance of advice, and not just relying on social media influencers. Among the people we surveyed, 61% typically take financial advice from family, and 56% from financial institutions or finance professionals.
It all boils down to this: Although you can find good advice from influencers, it’s mixed in with not-so-great advice, and it can take a trained eye to separate the two.
Bad FinTok advice
Here’s where we get to the bad stuff. According to our survey, tips centred on investing in the same stocks as the rich and famous, and the many videos promising “passive income tricks to make money fast” are among the worst pieces of advice our respondents have seen.
Worse, some advice you encounter might be illegal or lead to huge losses. This includes committing cheque fraud, stock market “hacks” and mortgage tips that could land you in hot water with your bank.
Cheque fraud
To be clear upfront, cheque fraud is illegal. It’s basically stealing money since you’re depositing a fake cheque and hoping for the money to land in your bank account.
A type of cheque fraud “advice” floating around FinTok recently went viral. It involved people recording themselves depositing cheques at Chase Bank ATMs in the U.S. and then making withdrawals. It was misleadingly presented as a glitch, implying that those who deposited cheques this way would get to keep the money.
Within several hours on TikTok, those who attempted the “trick” started posting negative balances on their bank accounts. Even worse, they are now also facing potential legal issues. The lesson? Beware of “free” money.
Stock market short selling
Short selling is a risky and complicated stock trading strategy in which you essentially bet that a stock will drop in price.
Without getting into too much detail, it basically works like this: You borrow shares (while paying interest on the value of the shares you borrow), sell them, and then hope the price drops so you can buy them back cheaper. The idea is to choose stocks you anticipate falling in value so that you’re selling high and buying low. When you return the borrowed shares, you can make a profit by pocketing the difference.
There are plenty of financial TikTok influencers who may tempt you to give short selling a try. But attempting to short the stock market means taking a huge risk. If the share price goes up, you are obligated to pay the difference, which can result in a large financial loss. In the infamous case of the “meme” stock GameStop, short sellers lost more than $1 billion (U.S.) trying to short the market.
“Short selling is a truly risky and nerve-racking investment tactic that I would really not recommend for beginners,” says Mike Allen, Head of Investments at Tangerine. “Remember, when you buy a stock, its value can only go down to $0, but when you short a stock, there is no limit to how much money you can lose.”
Unfortunately, around 24% of those we surveyed feel they’ve followed bad financial advice on FinTok. About 13% of respondents specifically noted investment advice as being harmful. Of those who say that advice led to them losing money, about 60% lost $500 or less. A small percentage (3%) lost more than $10,000.
Even if you’re an experienced investor, you should be wary of what the finance TikTok community says about short selling.
Mortgage tricks
You want to look your best financially when applying for a mortgage, but trying to trick lenders is a risky move – and potentially fraudulent too. When you complete a mortgage application, you need to assert that the information you provide is complete and accurate, so intentionally misrepresenting your finances could actually be a crime.
Doing things like withdrawing money in cash so lenders don’t see what you’re spending on, applying by yourself instead of with your spouse because they have a bad credit score, or borrowing money from family to pad your bank account are some dubious pieces of advice.
Steer clear if you encounter tips like this:
🚨 Withdrawing large sums of cash to mask spending habits. This would arouse suspicion with your lender and might make you appear financially irresponsible.
🚨 Applying for a mortgage without disclosing a spouse with poor credit. This may be considered fraud.
What’s more, these “tricks” are unlikely to succeed, since major lenders will do a thorough credit check and ask for proof of income. As for padding your account, any suspicious or large deposits will likely require back-up documentation to verify that they come from a good source.
What is some of the best FinTok advice out there?
If you didn’t have family who showed you the ropes, or you’re like the 67% of our survey respondents who didn’t learn about finances in school, FinTok might be helpful in some ways. In fact, 86% have turned to financial TikTok content for advice for two years or less, indicating a large increase in users seeking financial advice.
Most of the best FinTok tips, according to our respondents, cover the basics of personal finances, like budgeting and the importance of having an emergency fund. There’s good investment advice on there, too — for instance, teaching the difference between types of securities.
Saving and budgeting advice
Advice on budgeting and saving on FinTok is useful to many people. Some of the most popular pieces of financial TikTok advice survey respondents found were loud budgeting, spending bans and cash stuffing (essentially a form of the envelope budgeting method).
Combined with tools like Tangerine’s Money Rules and Goals, the financial education you can get from TikTok can be genuinely valuable.
“If there’s one thing you do that will put you ahead, it’s to have a plan for your money,” says Millicent Poon, Tangerine’s Chief Financial Officer. “Even just a basic budget keeping track of what you spend and save every month. It’s so easy and a really effective way to give you some control over your wallet.”
Let’s look at some helpful savings strategies floating around FinTok. There are multiple ways to save, depending on what works best for your specific financial situation, so find one that will work well for you.
No-spend monthly challenges
A no-spend challenge is where you challenge yourself to not spend money on unnecessary items for a month (or whatever period of time you choose). Another option is to choose what you limit your spending on.
The point is to help you save and to be more aware of where your money goes.
Pay yourself first
If you spend much time watching Fintok videos, you’ll hear this advice a lot. “Paying yourself first” is the simple idea that, as soon as your paycheque comes in, you should automatically allocate a portion of it to savings, so that spending it is never an option. You won’t even notice it’s gone because you never saw it in the first place.
Most financial institutions allow you to set up automatic payments (at Tangerine this is called an Automatic Savings Program) to regularly move a set amount of money into a designated account.
50-30-20 rule
The 50-30-20 rule is a budgeting strategy in which you allocate 50% of your income to needs, 30% to wants and 20% toward savings. It’s a useful guideline that helps make sure you have money to cover your bills while still having fun and saving for future goals. Now, given today’s higher cost of living, this rule can be modified to a more realistic ratio such as 60-30-10, so find what works best for your financial situation.
The 52-week challenge
We love the 52-week challenge, a simple, gamified strategy to grow your savings. Finfluencers sometimes kick off the year with the challenge, which involves putting aside $1 in week 1, $2 in week 2, until you reach $52 in week 52. By the end of the year, you will have amassed $1,378.
Emergency fund
An emergency fund is a bank account where you set money aside for unexpected events, such as a car or home repair bill. Having emergency savings gives you access to cash when you need it and helps prevent you from going into unnecessary debt.
“It’s really important to have a buffer of money ready to cover any unexpected expenses, because you never know what’s going to happen,” says Poon. “Unfortunately, not everyone is in a position to have an emergency fund. And I’d say if you have high-interest debts, such as credit-card debt, you might consider paying that off first before you start building up your emergency fund.”
Investment tips on FinTok
While many say they have encountered poor investment advice on TikTok, the platform can be useful for education about investments. Whereas it’s best to seek financial advice from qualified advisors, influencers may be able to share general information that can be beneficial to a young audience. Here are some examples of what you could learn.
Stocks and bonds
Stocks are shares you own in a company, and bonds are essentially a loan you make to a company or government that will be paid back to you with interest. Bonds tend to give you more stable returns, whereas stocks typically fluctuate more in value, which usually translates to higher risk. Certain TikTok influencers can break down the differences in more detail. We always recommend doing your own research and ensuring that any investment is in your best interest, not just because someone told you to invest.
RRSPs and TFSAs
Registered Retirement Savings Plans (RRSPs, or RSPs at Tangerine) and Tax-Free Savings Accounts (TFSAs) were created by the federal government to help Canadians save and invest for the future. Both offer tax benefits and come with limits on how much you can contribute. Contributions to an RRSP are tax-deductible, and you don’t pay taxes on any growth in the plan until you make withdrawals, usually in retirement.
A TFSA allows you to make contributions up to the limit, and the money grows tax-free. You can also withdraw at any time without paying tax on the withdrawal.
“TFSAs and RRSPs are both powerful tools to grow your money and save on taxes, but they work in very different ways, so definitely do some research first,” says Mike Allen. “Generally, if you have a steady income you’ll want to open an RRSP to reduce your income taxes. If you’re in a lower income bracket, or you think you might need the money before you retire, a TFSA may be a better option.”
Mutual funds and ETFs
Both mutual funds and exchange-traded funds (ETFs) are a good way to spread your money across a wide variety of investments, including stocks and bonds. Your money is pooled with all other investors in the fund. The difference with ETFs is that they can be bought and sold on the stock market, and they are more likely to have lower management fees. (Tangerine offers various low-fee1 Investment Funds, including ETF Portfolios.)
GICs
A guaranteed investment certificate, or GIC, is where you basically lend money to a financial institution at a guaranteed interest rate. You lock in your money for a set period of time – in return, your principal amount is guaranteed, and so is the interest you receive when that time is up.
“A GIC is one of the tools Canadians have for growing their money at a predictable rate,” says Andy Peng, Director of Deposits Products at Tangerine. “Sure, it may not be exciting, but it will never keep you up at night because you always know what you’re getting.”
Large purchases
Some of the more helpful FinTok advice on making large purchases centres on specific money-saving tactics, whether for a house, car or wedding.
Buying a car
Buying a car can get expensive, which is why it’s important to see what dealers may be offering, like manufacturing rebates or a better rate on an auto loan. Some advice on TikTok suggests buying a used car, but even those can be pricey. If you have a line of credit with an interest rate lower than the car loan being offered, consider using that instead.
Wedding budgeting
It can be really easy to overspend on your nuptials, but the FinTok community has some great wedding budgeting advice for keeping it in check. Some tips include renting or buying used wedding decorations, sending electronic invitations, and making a cash-only registry.
Debt payment strategies
FinTok influencers teach various debt repayment strategies that can help keep debt from getting out of hand. Even trends like loud budgeting can help you find accountability so that you can consistently pay down debt without having to sacrifice everything fun in your life.
Methods like the snowball method and debt consolidation loans can work for a variety of debt situations.
The avalanche method and the snowball method
Both of these strategies help you pay off multiple debts with a solid plan.
With the debt snowball method, you make minimum payments for all your debts but extra payments on your smallest balance first. Once that’s paid off, you route the extra payments toward the second-smallest debt. The idea is to keep going until you’re debt-free.
With the avalanche method, you make minimum payments on all debts and direct any extra money towards the debt with the highest interest rate. Those are the debts most likely to spiral out of control, so this method is the one we’d be more likely to recommend.
Both of these payoff strategies effectively break down a big financial goal into smaller steps, or inchstones, which can work wonders in keeping you motivated.
“Sometimes you have to live your life a little and treat yourself,” says Natalie Jones, Tangerine’s Chief Marketing Officer. “Every time you accomplish something on your financial to-do list, whether it’s paying off a debt or setting up an automatic bill payment, you need to celebrate that ‘inchstone.’ That doesn’t necessarily mean spending money, but it’s important to reward yourself for your victories, big or small.”
Debt consolidation loan
A debt consolidation loan pays off some or all of your high-interest debt. Ideally, your debt consolidation loan has a lower interest rate, saving you money. Or it can help simplify payments, since you’re making only one payment instead of multiple payments.
Credit card balance transfers
Depending on your credit profile, you might find a credit card that offers a limited-time 0% or low introductory interest rate. You may be able to then transfer a balance from another credit card, helping you save money on interest. You may already have a credit card that allows you to transfer another card’s balance at a lower rate for a number of months, which can give you more time to pay down the debt.
Make sure you read the fine print if you go this route, as you may have to pay a balance transfer fee. Also, verify how long the introductory rate lasts before the regular interest rate kicks in.
Paying down your mortgage
According to our survey respondents, paying extra each month on your mortgage ranked high among the best pieces of FinTok advice they’ve received. Doing so can save you thousands of dollars or more in interest over the life of your loan.
“If you can afford to pay down your mortgage even a little bit faster, go for it,” agrees George Kibalian, Senior Manager and mortgage expert at Tangerine. “You’d be surprised how much time you can shave off your mortgage with one extra payment every year.”
FinTok can be a helpful source for financial support
Using TikTok to expand your financial literacy can be worthwhile, but be discerning about who you listen to. For example, you’ll want to vet influencers’ expertise, as 51% of our survey respondents do. Those surveyed also valued relatability, with 37% seeking out creators whose interests, lifestyles and demographic backgrounds are similar to their own. Another 12% turned to aspirational creators they could look up to.
Although many of our respondents who follow FinTok advice experienced gains, a nearly equal number feel they lost money after following bad advice. That’s why it’s important to supplement FinTok advice with guidance from a professional with in-depth financial knowledge. They can help you ensure the advice you follow is legitimate and smart.
TikTok can be a great starting point for your financial education, but be vigilant. Balance advice from trusted FinTok sources with guidance from professionals, and you’ll be on your way to a brighter financial future.
Methodology
We surveyed 1,000 Canadians aged 16-99 who actively use TikTok for financial advice, to gauge their opinions and experiences. The survey, conducted by NPD on behalf of Tangerine, using the Pollfish platform, ran from Sept. 13 to Sept. 29, 2024.
1A fund’s expenses are made up of the management fee (including the trailing commission), operating expenses, trading costs, and fixed administration fee. The annual management fee is 0.80% of each Tangerine Core Portfolio, 0.50% of each Tangerine Global ETF Portfolio, and 0.55% of each Tangerine Socially Responsible Global Portfolio. The fixed administration fee is the same for all Tangerine Investment Funds and is 0.15% of each Portfolio’s value.
