Technology has been changing the way people connect with each other since before any of us alive were born. The telegraph and phone started us off. Radio and film pick things up from there. Then, the internet came into the mix. At each evolution, our communications network grew, and so did the amount of information we received. Information we then use to shape every part of our lives, from our relationships, careers, and financial health.
Social media is our latest connection evolution. According to Statista, the average Canadian spends almost two hours a day on social media. Sites such as Facebook, YouTube, Instagram, and TikTok have made us into an audience to the lives, opinions, and ideas (AKA information) of billions of people around the world every day. It’s no wonder it’s had a profound impact on all aspects of our lives, including our finances.
The impact social media has on mental and financial health
People are becoming more aware of the connection between their finances and social media. Even so, many may not realize just how intertwined they’ve become. Some of the connections, like courses or products being sold, are obvious. Others, like well-done product placement and even unintended influence, are more subtle. The expertly constructed and extremely nuanced algorithms these sites use to exploit data only enhance their financial impact.
What’s most concerning about this is the strong connection between mental and financial health. A lack of financial wellness, whether because of social media or not, is well-documented to have adverse effects on mental health. Studies show that financial stress can lead to sleepless nights, anxiety and depression, among other things. Below are just four of the ways social media influences the connection between mental and financial health.
Social pressure
It’s easy to forget that most people only showcase the best, most “Insta-worthy” parts of their lives. Watching these curated versions of other people can lead us into the mindset of wanting to live up to that same image. Though this seems to be changing, with more people choosing to show a less polished version of themselves, the effect this has on us is still something to be aware of. When our income doesn’t fit the bill to keep up, it may make us feel that we are lacking in our lives. This mindset can make us spend money on something we can’t afford and put our financial health at risk.
Impulse buying
Social media algorithms cater to your most niche interests, making the urge to click the link and purchase an item hard to fight. This has created a form of fast-paced consumerism. Leading people to reach for their credit cards before they even realize what they are doing. This new reality doesn’t leave room for people to stop to think if they can really afford what they’re buying. Falling into this trap often puts people at risk of accumulating large amounts of debt.
Fear of missing out (FOMO)
Though this experience was not created by social media, it is surely exacerbated by it. There’s pressure to keep up with peers and advertise the life you want people to think you have, or even have any social life. Global News reports that a recent survey found 1 in 5 Canadians went into debt to keep pace with the habits of their friends. Many young people only earn enough cash to make ends meet. Survey findings support this idea, saying that just under half of Millennials and GenZ have skipped out on social connections because of financial restraints.
Bad financial advice
These new channels of media support quick access to information. Self-proclaimed gurus offer “help” to the masses, feeding them advice on financial goals and health. It’s best to be wary, as their lack of expertise means they share incorrect information. Many of these gurus are not properly certified to give legitimate financial advice. Luckily, this can be somewhat easily rectified by verifying the credentials of the person offering the advice.
The negative side of social media in finance
Mental health is just one way finances can be negatively impacted by social media. Consumer debt in Canada is reaching an all-time high. TransUnion reports that the average Canadian is carrying $27,100 in non-mortgage debt. The impact of social media is adding to the problem.
Much of the social media content we consume is the creator addressing the audience directly. Their dialogue is usually conversational and friendly. They act as if the audience is there with them. This creates what’s called a parasocial relationship, a form of an imbalanced relationship. The audience feels a friendship towards the creator, even though they’ve never actually met and have limited knowledge of the creator. This form of relationship sets up a foundation that makes the audience more likely to trust and value the creator’s opinions. In other words, we rely on their input even though they don’t really know anything about us. This has a direct impact on our finances because it can lead us to make decisions, like buying products or investing, that aren’t correct for us.
AI’s influence
Some of the impact made by social media is compounded in a few ways by the rise of Artificial Intelligence.
- The first is that AI cuts down the time it takes to make content drastically. This has freed up a lot of time for creators. Time they can use to either create more content that inspires you to buy, or set up more affiliate or sponsorship contacts that they end up folding into their portfolio of things to promote.
- Secondly, creators can use AI’s impeccable analysis skills to boost their ability to sell. They can use this information to choose words and offers that are more enticing so that you are more inclined to buy.
- Lastly, scammers are using AI to create hyper-realistic content to trap you into giving them your data or money.
Avoiding the pitfalls
You can curb the negative effects of social media in a couple of ways. Be diligent about what you consume. Vet the people you follow so the information you get comes from a high authority. Along with that, the best thing you can do is improve your own financial literacy. By making your own financial plan, or using an online budget planner, you set solid expectations for yourself. These help you stay on track financially regardless of what you see online. If you’re very susceptible to buying by way of social media, you can also set up a sinking fund specifically for these purchases. This will help keep you from going into debt.
It’s not all bad
In fact, some of it is really good!
One big benefit of the way we find products through social media is having access to real and honest reviews by everyday people. While it makes sense to take an influencer’s opinion of a product with a grain of salt, social media also opens the door for any and all people to easily offer up their opinion about something. Anything worthwhile is likely to have a long list of video reviews by regular people of all backgrounds. There are also ways you can use social media to your benefit. Following brands you like can give you access to deals and offers. This way, you can get what you want at a discounted price. If you use your credit card to make the purchase, just make a habit of paying it off right away. Not only will it prevent debt, but it will also improve your credit score.
Conclusion
Consuming social media is now a cultural staple. Even if it wasn’t, not many people would be willing to give it up. By being aware of how content can affect your habits, you can take the right measures maintain financial health. Resources, such as our financial calculators, are available to help you create a personal budget so you’ll stay financially healthy while also taking pleasure in some of the finer things in life.
