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Here’s what: How to wade through the swamp of internet money advice
Spend any time on TikTok, Reddit, YouTube, or other
and you’re sure to come across money advice of one stripe or another. Plenty of qualified professionals share solid advice on their popular channels, like Tiffany “The Budgetnista” Aliche and Soledad Fernández Paulino of Wealth Para Todos. But there are also plenty of “tips” you should ignore, ignore, ignore — or at least question.
I recently spoke to Anne Lester about how to identify bad internet money advice. Lester is the former head of retirement solutions at JPMorgan, where she worked for nearly three decades, and founder of the Aspen Leadership Forum on Retirement Savings; she left JPMorgan to focus on helping Gen Z and millennials save more for retirement and invest well. Given that almost 40% of Gen Zers say they learn about money from social media, Lester is working overtime to ensure young people start their retirement journeys on the right foot.
“I think there’s some extraordinarily sound advice out there,” Lester said. “But I also think there’s some stuff that, when I put my JPMorgan hat on, the hair on the back of my neck stands up because it’s so terrible.”
She said there are two red flags to look out for when you’re scrolling through money advice online.
First: Anyone telling you to BUY or SELL anything in big, bold, all-caps letters
You should never buy or sell something just because an influencer says you should. period.
“Especially things like crypto and individual stocks,” Lester said. “Some people are true believers that are out there pounding the table, but a lot of people — it’s a classic thing of, talk up something you have a stake in and then quietly sell it behind the buyers. That’s been going on as long as there have been financial markets.”
She said that, as an investor, you should be able to explain in simple terms why you have returns from something. For example, X company makes a product that people want to buy. Over time, if the company is well-run, that gets reflected in the value of the company.
On crypto, however, “I don’t see anyone who’s given a reasonable argument for why it should keep going up in value,” she said.
Second: Blanket absolutes that “everyone” should follow
When you see blanket advice — like “everyone should buy a house” — Lester said to question it. It may make sense for you, but no single financial decision — like buying a home — is going to be right for everyone.
Lester explained that, for all financial advice, there’s a headline that’s almost always true — for example, you should save — but beyond that it all depends on your situation. Yes, you should save, but how much to save, where to put your money, and what you save for will all depend on your specific scenario and goals.
“You should have your long-term savings, like for retirement, invested in a mix of stocks and bonds. That’s good advice. But beyond that, it all starts depending,” she said. For example, “One of the things I’ve seen lately is, ‘You must buy a house,’ or, ‘You should never buy a house.’ Those are both terrible pieces of advice, because the real answer is: It depends.”
Ultimately, Lester’s recommendation is twofold: First, take time to question the money advice you’re consuming, and think about its source. Most people sharing this kind of information are making money in some way, either through clicks (which explains the Big! Bold! headlines, since they’re designed to use our emotions and anxieties to get us to click) or from something they’re selling.
“Younger people are very distrustful of ‘the system’ because they perceive to be being sold all the time. I think there’s a healthy degree of skepticism around that,” she said, “But I would point out that most people online have got a revenue model associated with their internet presence.”
Making money online isn’t bad in and of itself. But influencers should be transparent about their revenue models so you can consider their advice in context.
And her second recommendation: If it seems too good to be true, it is. “You can always look back at the one stock” that blew up and made early investors rich, like Apple or Tesla, Lester said. That will always be true. “But the reality is that’s not a sustainable or reliable way to make money.” With every single “easy” way to make money, “It works until it stops working.”
— Stephanie Hallett, senior editor of Personal Finance Insider
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