Updated: November 7, 2024
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Social media creates connection opportunities with people and communities. It can help you stay up-to-date on trends and easily locate information about various topics. But how you utilize it can influence your decisions, ultimately impacting your financial and mental well-being.
Understanding its potentially negative effects on your behaviors can help you watch your spending habits and thought patterns, maximize its benefits and achieve your financial goals.
Social Media's Influence on Financial Decisions
Social media can impact a person’s financial and mental well-being. Whether the impacts are beneficial or detrimental depends on how a person uses social media.
Approximately 11% or one in 10 Americans often rely on social media content when making financial decisions.
Although the most trusted online resources for financial information are online tools offered by financial service providers (63%), one in five Americans say social media is another go-to resource.
Social media and the fear of missing out (FOMO) affect how people spend, with three in five or 57% saying that they watch how their friends spend versus how they save.
Around 34% of Americans say social media influenced them to spend money on experiences.
Social media can be a source of bad financial advice, impulsive purchases, peer pressure and financial stress. But responsible use can help you yield financial gains and access learning and growth opportunities.
Social media refers to any internet-based platform facilitating virtual networks and online communities where people share ideas, messages, information and other forms of content such as images and videos. Among the most common are YouTube, Facebook, Instagram, Twitter, TikTok, Pinterest and LinkedIn.
Building connections and staying updated on news or trends are some of social media’s benefits, making it popular across generations. In 2021, approximately 72% of American adults reported having at least one social media account.
However, potential drawbacks exist. Frequent social media use can harm your financial health. It can also amplify financial stress, which may lead to mental health issues.
Social media can be a good source of information. But depending on your habits, it can also negatively affect your financial health.
Fear of missing out (FOMO)
FOMO is the feeling that others have or are experiencing something good you don’t want to miss out on. For instance, seeing your social media feeds full of friends buying the latest gadgets may tempt you to want to have the same. A study conducted by the Charles Schwab Corporation found that three in five Americans tend to pay more attention to how their friends spend versus how they save.
Impulse buying and overspending
Social media can cause individuals to feel a need to be included and keep up with the trends. Advertisements for products you’re interested in can fill your feeds. Seeing your favorite influencers hyping certain products may also convince you to try the items. This could create compulsive buying and overspending habits, resulting in debt.
Bad financial advice
There may be individuals claiming to have expertise in financial matters. If you’re not careful, you may follow the advice of self-proclaimed experts who only encourage you to finance your fantasy. According to the Teachers Insurance and Annuity Association of America’s Digital Engagement Survey, 32% of Americans say they consider the advice of social media influencers and celebrities trustworthy.
Social/peer pressure
Trying to replicate the lifestyles of people around you may affect how you manage your money. Since no one's financial situation is the same, you may be prone to choices that aren't appropriate for your means by following others. These decisions can lead to unmanageable debt.
Aside from your financial health, your physical and mental well-being may also suffer. For some, this becomes an endless cycle that’s hard to get out of. Poor financial health influences mental well-being and mental health issues affect the way you spend.
Stress
In a 2021 MoneyGeek survey, 89% of respondents said their finances were a source of stress. Financial stress can turn into chronic stress, changing a person’s behavior.
Anxiety and panic
Constantly worrying about finances can trigger anxiety. You may feel panic attacks, shaking, sweating, rapid heartbeat, dry mouth and shortness of breath. In more severe cases, the cumulative financial strain also increases suicide risk.
Accumulated health care costs
Financial stress can lead to unhealthy coping methods, such as drinking too much alcohol, overeating or abusing prescription and illegal drugs. These could affect your overall health and mental well-being, such as a weakened immune system, frequent colds, and needing therapy services or professional intervention. All of these may leave you with large healthcare expenses.
The frequent use of social media may change your financial behavior. It may influence how you manage your money, make purchasing decisions and choose an investment strategy. Similar to traditional media, such as television, magazines, newspapers and billboards, businesses use social media as a platform to advertise products and services. However, unlike other platforms, social media allows immediate communication and faster transactions.
Social media platforms have terms and conditions you must consent to when signing up. These may allow a platform to save and monitor your data. An algorithm using the data predicts personalized products and services.
Purchasing from a social media application is quick and easy. You can buy a product without leaving the platform. This also makes it faster and easier for users to spend money.
Many businesses have turned to influencer marketing to promote their products or services through videos and posts. Social media influencers are individuals who usually have a considerable following in a specific niche. Marketing agencies and brands estimate the influencer marketing industry will grow to about $21.1 billion in 2023.
Using this type of advertising, people make purchasing decisions based on the behavior of others. For example, seeing a lot of good comments or reviews about a particular product may make you decide that the company is trustworthy and that the product is good.
Trending topics and products may trigger FOMO. The social pressure to fit in and feelings of envy or insecurity may compel you to spend money without weighing the benefits and drawbacks.
It’s possible to protect your financial and mental well-being and prevent potential negative impacts of social media. Changing how you use social media can minimize possible drawbacks. Here are some tips you may want to consider for healthy social media use:
Carefully screen and choose influencers
Curating your social media feeds is essential. Review the accounts, brands and influencers you follow. Unsubscribe or unfollow those that promote expensive lifestyles or offer poor financial advice.
Set a limit on your daily social media use
Don’t let social media consume your time and intervene with in-person communications. Set some rules for yourself. For instance, don’t check your social media accounts during meals, work hours and family time. It may also help to turn off notifications.
Do a social media detox
If you’re already overwhelmed, taking a break from social media may be best. Some applications, such as Facebook, can deactivate your account for a short period.
Improve your money mindset
Focus on your finances. Set goals and hold yourself accountable. For instance, take a few hours off of the Internet and sit down to make a budget. Research ways to grow your money. Watch videos or read articles from reliable sources.
People of all ages may experience FOMO. But trying to keep up with everything others do and buy can prevent you from making wise decisions. Fortunately, there are ways to overcome financial FOMO and stay on track despite exposure to risky trends. Below are some of them:
First, you need to review your current financial situation and outline your goals. This may also prevent you from using your money on unexpected and unplanned purchases.
One way of overcoming FOMO is by being disciplined. Create a budget to control your spending. Prioritize necessities.
Set aside a percentage of your income and build your savings. You can do this to prepare for a significant expense. It’s also important to have an emergency fund, which will serve as your financial safety net for unexpected expenses.
The right investments will help you grow your finances. Before jumping in, review your options well. Don’t fall into herding — where the investments and decisions of others influence you. When in doubt, seek professional advice.
Once you learn how to use social media responsibly and understand the potential drawbacks you may encounter, you can better manage the way you use it. You’ll be able to maximize your time on social platforms and yield financial gains.
Social media can be a good vehicle for financial management, improving financial wellness and reducing financial stress.
An excellent way to save money is to find the best deals. If you need to make an online purchase, look for coupons, discount codes and special offers. You can also try contacting a brand directly on their social media account. Some companies respond to customers and even make special offers.
Social media can be an excellent tool for landing your next job. You can use social media platforms to showcase your skills, accomplishments and experience. You can also establish your credibility and expertise. Post content relevant to your field. Grow your professional network by connecting with industry leaders.
You can also earn money through social media. Look for social media-related positions, such as social media managers and online customer service representatives.
Another earning option is selling products. Many companies also offer affiliate programs, allowing individuals to earn a passive income by promoting products and services.
Social media provides opportunities to engage with communities, organizations and individuals who share the same interests. You can grow your industry network or begin meeting others in industries you’re interested in.
You can also find online groups that can provide support. For example, there are financial independence groups that allow people to discuss and share ways to earn, save and invest.
It may not be something you immediately recognize, but over time you start to notice the impact social media use can have on your money management confidence. Social media often has us falling into the trap of comparison, impulse spending and taking the advice of Finfluencers (financial influencers). These attributes of social media can ultimately heighten our stress regarding money. We think we need to have a certain amount of wealth to be happy, a specific product to look good or we have to make the same financial decisions that a guy with 400,000 followers has made to create his version of financial success.
The first step is the recognition of stress and determining what is triggering it. If that stress comes from comparison or impulse spending, evaluate your values and make sure your financial decisions align with those values.
One of the greatest causes of negative well-being related to social media is social comparison, which can happen in various domains, including the financial one. Based on my own and others’ research, I recommend engaging with social media more actively rather than passively. That is, use it to learn new skills (e.g., financial literacy) or to promote your own business, but reduce the extent to which you’re scrolling through other people’s accounts. If you do find yourself comparing your own status to the success of others (e.g., your friend just bought a big, beautiful new house and is posting pictures of it), try to notice how that feels in your body, notice the emotions that are coming up for you and then make the conscious decision to take a break from social media. Also, try to be mindful of instances where you’re looking for validation. So, promote your business, but notice if you start taking likes and comments on that post too seriously.
Social media use has a lot of adverse side effects. The easiest way to handle this additional stress is to log off.
My social media apps are hidden because I removed them from the home screen on my phone. Being forced to swipe multiple times and then search for an app reduces our likelihood of using the app. Setting a screen time limit is also helpful in reducing how much time you spend scrolling during each session or per day or week.
Another helpful tip is to curate your feed. Take a few days to scroll social media like normal, but note what content, users and media types add value to your life. Only follow users who do something for you. Block creators that don’t make you feel good. Use features in your app to tell the algorithm what content you do and don't want to see. Curating my social media reduced my time using it while increasing the value I get out of it.
Another tip is to practice grounding and mindfulness exercises before and after using social media. Make flashcards, wallpapers and backgrounds for your devices that feature your core values, purpose in life, top financial goals and most rewarding memories. It's easy to forget whose life you're living — sometimes something as small as a smartphone wallpaper can help your subconscious come back. One of my favorite exercises is to list 10 things I'm thankful I have and three things I'm thankful I don't have, yet. The caveat is that if I can't verbally list anything that comes immediately to mind, I have to search for it.
Ask a question, it’s free
Ask an expertThere are a lot of resources available to help individuals who are having trouble balancing social media use and financial health. Here are some of them.
About Nathan Paulus
Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy.
Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.
