- Financial TikTok, also known as #FinTok, is now one of the most popular sources of financial news, tips and advice, especially among Gen Z.
- “Noisy budgeting,” “cash stuffing,” and the “don’t spend” challenge are just a few of the latest money-saving trends that have gone viral.
- According to experts, there’s no substitute for establishing a routine that you can maintain over time.
From money stuffing to loud budgeting, TikTok is full of ways to build wealth — and more and more people are taking notice.
Financial TikTok, also known as #FinTok, is now one of the most popular sources of financial news, tips and advice, especially among Gen Z.
With less access to professional advisors and a preference for obtaining information online, members of Gen Z are more likely than any other generation to engage in finfluencer content on TikTok, YouTube and Instagram, according to a report from the CFA Institute.
Learn more about personal finance:
“Noisy budgeting” is having a moment
Nearly half of young adults suffer from “financial dysmorphia”
Here’s what’s wrong with the “100 envelopes” method
In fact, Gen Zers are nearly five times more likely than adults in their 40s or older to report receiving financial advice — including stock advice — on social media, according to a separate report from CreditCards.com .
But even the best advice can backfire. Here’s what you need to know before jumping into the latest money-saving trend.
‘Noisy budgeting’ can ‘lead to frustration’
“Noisy budgeting,” which encourages consumers to take control of their finances and express their money choices over other activities, like going out with friends, is one of the biggest trends in the world. year.
While reducing discretionary spending is essential for better budgeting, limiting your social interactions also comes at a cost, according to Paul Hoffman, a data analyst at BestBrokers, who recently authored a report on harmful FinTok trends. Before you decline a movie or dinner date, consider that declining these invitations can “lead to frustration and emotional distress,” he said.
There may be better ways to cut expenses, Hoffman advised, without sacrificing time with loved ones. “It’s important to find a balance between saving and engaging in enjoyable activities,” he said.
The “100 Envelopes” Trick Creates a Missed Opportunity
More and more young adults are also trying the “100 Envelopes” method, which involves saving an extra dollar every day for 100 days. The first day you will put aside $1, then $2 the next day and so on, so at the end of the 100 day period you will have saved over $5,000.
This seems like a good idea “with a relatively low cap,” according to Matt Schulz, chief credit analyst at LendingTree. However, “if there was ever a time when you shouldn’t put your money in a filing cabinet, it’s now that you can get 4-5% or more back in those high-yield savings accounts.” , did he declare.
After a series of interest rate hikes from the Federal Reserve, some high-yield online savings accounts now pay even more than 5%, according to Bankrate.com, well above the rate of inflation.
In this case, if you had $5,000 in a high-yield savings account earning 5%, you would have earned about $250 in interest in a year.
Cash stuffing also loses interest
Another envelope method, called “cash stuffing,” advocates dividing your spending money into envelopes representing your monthly expenses, such as groceries and gas, in order to stay within your budget and avoid going into debt.
When money in one envelope is spent, you are either finished spending in that category for that month or you need to borrow from another envelope.
Yet hiding cash not only deprives you of the best returns in decades, but also leaves you vulnerable to theft and could cause you to forgo the protections offered by consumer banking.
Whether and to what extent you are covered in the event of a burglary may depend on your home insurance policy, while banks are covered by the FDIC, which insures your money up to $250,000 per depositor per account ownership category.
“No Spending” Challenges Can Be Difficult to Maintain
Alternatively, the ‘no spending’ challenge encourages completely eliminating all non-essential purchases for a week, a ‘no shopping month’ or even a full year, and investing money that would otherwise be spent on dinners going to a restaurant or new clothes towards a long-term investment. financial goal.
“Gamification can be pretty fun,” Ted Rossman, senior industry analyst at Bankrate, told CNBC recently. But like any other quick fix, these challenges could be difficult to maintain over time.
Rather than jumping into the latest extreme fad, “it comes down to budgeting and setting expectations,” he said.
Ultimately, there’s no shortcut to developing good financial habits, most experts say.
“No hack can teach you self-control, mindful spending, or how to keep your balance low,” Hoffman added.
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