Beware the Financial Scams on Social Media. Your Wallet Will Thank You Later.
If you want to avoid losing money, then whatever you do, don’t fall for the financial scams proliferating across social media right now. According to new survey data, 31% of social media users acted on financial advice they found online. And, perhaps not surprisingly, 55% also reported losing money doing so.
Impact on young investors
The conclusion is clear: unregulated financial advice is becoming a real epidemic across social media. What’s particularly worrisome about this new trend is how it is impacting younger investors. In the 16-to-24 age bracket, 42% of people fell for online scams, and in the 25-to-34 age bracket, 37% of users fell for online scams. By way of comparison, only 11% of older investors (age 55 and up) acted on financial advice they saw online.
Obviously, having a lifetime of experience helps to weed out some of the more obvious scams. Older investors aren’t as swayed by flashy types showing off their new expensive sports car, or bragging about how much money they make per month. And, really, some of those claims are off the charts. Even if you’re just a casual YouTube user, you’ve probably seen ads promising to help you make $10,000 or more per month, with absolutely no risk involved.
What types of advice are people falling for?
While the survey did not provide data about the exact types of scams that people fell for, it’s easy to guess. Some of them likely involved cryptocurrencies, especially fly-by-night meme coins at ridiculously low prices. Some of them likely involved real estate, such as ads claiming that you can invest in tax liens and walk away with millions of dollars worth of property.
And what to make of the explosion of ads featuring gold and other commodities? This preys on people’s economic fears, but could be a pathway to disaster. As could all those ads promising to turn your home into a cash machine. And you can forget about all those ads claiming they can turn you into a stock market investing genius. Just by looking for a few obvious trading signals, and trading for just a few minutes a day, you too, can become a stock market millionaire. Right.
How prevalent are these scams?
By all accounts, these ads are becoming more and more prevalent. In fact, more than 70% of all investment fraud cases now stem from social media. That’s in part because all of this financial advice is largely unregulated. If you’re an online influencer, all you have to do is make a few disclaimers along the lines of, “I”m not a financial advisor and this is not financial advice” and you can say just about anything you want.
Most young people don’t get the economic or financial knowledge they need in schools, and so they don’t know how to discern between what’s real and what’s fake. All they know is that some influencer younger than them got rich quick, and they want to do the same thing.
Most of the time, they aren’t even looking for this content - it somehow finds them. Approximately 80% of people say that they don’t search for financial content online, it just somehow seeps into their social feeds.
Not all are scammers
It should be pointed out: not all influencers are scam artists. Some of them are sincerely trying to help you find tax loopholes, or find that next 10-bagger cryptocurrency. But they don’t have any obvious credentials, and a lot of them are actually getting paid to make their endorsements, whether they admit it or not. Thus, they make money, even if you don’t.
It’s just too easy to fall for online scams. As a result, a lot of young people are getting preyed on by financial predators who know how to set the right bait on social media. Something needs to be done now to solve this problem. Even simple steps can make a big difference.