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TikTok, widely popular for its short videos, remains the fastest-growing social media application. It has snowballed since its introduction in 2016, amassing 3 billion downloads and penetrating a third of all social media users in four years. By comparison, Facebook and Instagram took nearly a decade to achieve a similar user base. 

Anyone who goes on TikTok is bound to come across unsolicited financial advice. The hashtag “#personalfinance” accumulated over 4.2 billion views on the app in early 2023. This popularity means knowledge-hungry viewers are accessing personal finance information through the app at an unprecedented scale. With the demand for financial advice risking, so is the number of “financial gurus” on the app. 

The personal finance community on TikTok is fondly called FinTok. In this community, any self-proclaimed expert can start an account and preach to a global audience. With the right hashtags and promotional tactics, financial influencers or “Finfluencers” gain clout and, in many cases, a loyal following. 

Popular topics cover the entire niche of personal finance, including investment for beginners, taxation, credit card debt, real estate, side hustles, and budgeting. Followers tend to be between 18 and 34, an age bracket increasingly building an interest in investment through social media. 

With FinTok’s popularity, it’s reasonable to ask whether these financial influencers are experienced or credentialed in finance. A growing number of these “Finfluencers” are advising on risky financial decisions without important information on their risks or disclaimers that provide the necessary warning. 

How do we distinguish between good and bad advice and credentialed and qualified advisers? Here, we explore the commonly encountered myths on personal finance and investing on TikTok and discuss the harm they can cause to your investments.

Why TikTok Appeals as a Source of Financial Advice

It’s easy to dismiss the TikTok investing advice phenomenon. But we must remember that this advice is geared towards an audience that has grown up online. In addition, it’s packaged in a catchy, easy-to-digest way that appeals to a broad audience. Young people deliver the advice, which makes it feel more democratic, accessible, and relatable to today’s investing crowd. The delivery method works.

TikTok is also addressing a problem among GenZers. This young generation has limited access to financial education in schools, and as it currently experiences its first economic crisis, TikTok seems a natural fit as an information source. They are interested and turning to TikTok’s influencers to inform their decisions so they can survive the uncertainty of today’s economic climate. 

Ideas like “cash-stuffing” have gone viral on TikTok. Cash stuffing is a budgeting method that went viral in 2022. It’s an age-old budgeting method that teaches you to divide physical cash into envelopes to allocate for expenses. Even if it is known to older generations, GenZ is encountering it for the first time, and it is one of their first exposures to personal budgeting. 

On the one hand, the democratization of finance is a good thing. Social media has opened the floodgates to financial information previously reserved for the wealthy and elite. However, along with democratization, the quality of the shared information matters if it is to be beneficial. 

Unfortunately, approximately one in seven personal finance advice videos are misleading, according to Paxful, a cryptocurrency company. The proliferation of poor-quality advice on personal finance is concerning, which is why TikTok users should arm themselves with the tools to detect myth from reality.

How To Tell if a TikTok Finance Influencer Is the Real Deal

It’s hard to know whom to trust on social media. To see whether you’re following a qualified “Finfluencer,” you must assess their credentials and experience in the financial sector. The number of likes and follows is not always an indicator of expertise. 

Moreover, these credentials need to be verified using other sources. You can check their LinkedIn profile to see whether their professed credentials match their resume. While this is not foolproof, it will give you a starting point and help you weed out fraudulent accounts early.

You can also check for some red flags and green flags. Green flags include influencers who take the time to listen and respond to their followers. You will notice these influencers will accommodate feedback and remodel their content to help solve everyday problems among their user base. You will also see that they can give their advice on the fly—in other words, much of their content is spontaneous or “live” as opposed to canned. 

Red flags include those accounts that try to sell you on a short-term buy and seem pushy. A major red flag would be an account that promises get-rich-quick schemes. There is no such thing as easy money. 

The Worst Financial Advice on TikTok: What To Avoid

While concise and entertaining, TikTok is a hotbed of misleading personal finance advice, myths, and misconceptions. To fully experience the perks of smart investing, you must screen the kind of financial advice you heed. The following are examples of misleading or blanket advice statements that do not apply to real-life or retail investors.

“Copy millionaires’ investments to get rich”

If you hear this advice on TikTok, be wary. Understand that any high net worth (HNW) individuala multi-millionaire or billionaire—will make decisions from a different standpoint than a retail trader. 

To start, large-scale investors and traders hold a large amount of capital. Because of this, they can absorb significant losses as these are factored into their strategy. Retail investors would make a massive mistake if they mindlessly mimic such big-name investors without extensive research into their moves and motives.

Big investors have different financial needs and goals. You wouldn’t expect Warren Buffet, one of the wealthiest men in the world, for example, to be investing to accumulate a nest egg in retirement. Buffet was quoted as saying his favorite holding period is “forever.” 

Thus, if you wish to cash out in a decade or when you retire, simply copying someone like Buffet could result in disaster. The scenario is vastly different for someone with limited funds, who is investing in life savings, or who cannot afford high-risk investments. Retail traders have less trading capital and cannot afford to lose as much money as institutions or the ultra-rich.

A sovereign wealth fund invests to grow a nation’s wealth and further its interests. Large corporations or business magnates may invest in a stock to orchestrate a hostile takeover. The range of goals is broad, so those with different objectives should take pause. 

More importantly, there is often information asymmetry involved in such decisions. Ordinary investors do not have access to the information or the circle of competence prominent investors have. They would not be privy to why such investors are making their trades. This asymmetry could cost them dearly. 

“Use leverage to increase your gains”

Leverage or financial leverage is the outcome of using borrowed funds or debt as capital to fund investments to amplify one’s asset base and returns. Some TikTok creators advise leveraging investments to maximize your profits.

Yes, it is possible to amplify your gains with leverage. Companies typically use leverage to finance existing assets or facilitate the acquisition of new investments. As an alternative to issuing stock to raise capital, they use debt financing to expand assets and operations to increase shareholder value. Investors also use leverage to increase investment returns exponentially. This move uses financial instruments like margin accounts, options, and futures.

The problem with leverage is it also increases your potential downside risk significantly. A highly leveraged property, investment, or company refers to one that has more debt than equity. Multiplying downside risk can wipe out an entire portfolio and completely deplete one’s lifetime savings, especially for inexperienced retail investors.

In trading, leverage can be an essential tool as it allows you to control a large amount of money using a comparatively small amount of capital. As with other forms of leverage, this can amplify gains and increase risk. Typically, a broker provides leverage ranging from 1:1 to 1:500, meaning a trader can control up to 500 times their capital in a trade. If a TikTok creator encourages you to use leverage in trading, know that it comes with a higher risk of losses.

A poorly orchestrated leverage trade may result in forced liquidation. This case means the broker may be forced to liquidate a position to reduce the trader’s risk if the trade moves against him. In addition, inexperienced and overleveraged traders risk margin calls. When the value of a trader’s account falls below a critical limit, a broker might give them a margin call that requires them to add funds to their account.

“Cryptocurrencies can make you rich”

Cryptocurrencies are exciting investments with much potential but far from foolproof. Bitcoin, Ethereum, and other leading cryptocurrencies are on institutional and large-scale investors’ radar, but they are still considered high-risk investments.

It’s important to understand that cryptocurrencies are highly volatile and speculative despite their popularity and ubiquity. It is possible to make large amounts trading crypto, but you could quickly lose everything. There is no guarantee that crypto will make you as rich as some internet millionaires or some TikTok creators make it seem. 

It’s best to adopt a safer approach to investing in crypto. Rather than attempting to time the markets and ride volatility, retail investors can opt to do DCA or dollar cost averaging. Dollar-cost averaging involves regularly investing a fixed dollar amount, regardless of the crypto asset’s price. Time-tested assets like Bitcoin are best for this approach. 

Moreover, DCA gives you the advantage of not having to monitor the markets. Over time, DCA lowers your average cost per coin or unit of crypto versus what you would have paid on a bulk buy at the top. Thus, it lowers effort, stress levels, and risks. Many conservative crypto investors practice DCA.

Another way to manage risk in crypto investment is to balance your portfolio with less risky or risk-off assets. Experienced investors still consider cryptocurrencies like Bitcoin and Ethereum as risk-on. Be sure to thoroughly research each cryptocurrency before jumping in. Ideally, you should be comfortable holding them for a long time and be capable of weathering the storms in between.  

“Traditional savings and retirement accounts are boring.”

Being a rebel sounds sexy. Some TikTok creators advocate taking risks and ditching traditional means of saving and investing to gain clout. In reality, being boring has nothing to do with whether an investment vehicle makes money.

Be careful of those who tell you to bet all on risky assets and abandon conventional vehicles. This advice may sound catchy, but it perpetuates a dangerous mentality in the young generation. If you avoid traditional investments like 401(k)s, traditional savings accounts, and other retirement vehicles, you could one day realize that avoidance cost you substantial retirement income.

For younger people like GenZ, time is an investment advantage. TikTok creators who encourage young investors to take significant risks and neglect the opportunity to make steady investments in instruments like IRAs that lead to exponential income in decades are depriving them of options and savings opportunities.

In addition, traditional accounts like Roth IRAs offer tax advantages and other opportunities to build a secure financial future. 

“Get rich quick: Invest in lucrative penny or OTC stocks”

Penny stocks are shares of companies trading over the counter for less than $5. Some sources define them as stocks that trade for less than $1. Otherwise known as microcap stocks, microcaps, or OTC stocks, they have low market capitalization. The US Securities and Exchange Commission defines them as those with a market capitalization of less than $250 million or, in other cases, $300 million. 

Many TikTok accounts promote penny stocks as vehicles for quick and significant gains or ROI. While it is true that some penny stocks can increase substantially, the majority are incapable of sustaining growth. For one, the companies that issue them lack the fundamentals that enable steady business growth. 

The inherent risks of penny stocks include a lack of financial reporting, poor liquidity, and a higher incidence of fraudulent schemes. The US SEC warns against these risks. Hence, be skeptical when you encounter get-rich schemes related to penny stocks. 

According to the SEC, studies find that microcaps or OTC stocks tend to be highly illiquid. They are also frequent targets of alleged market manipulation. Such stocks generate inconsistent or volatile investment returns at best. Most of these companies, as mentioned, fail to grow into a more prominent company. These also rarely ever make it to listing on a formal stock exchange. 

Harmful Outcomes of Misleading TikTok Advice

What happens when you follow misleading personal financial advice? Following the wrong financial advice on TikTok can lead to disastrous consequences. Now that we’ve debunked the most common myths on personal finance peddled on TikTok, it’s essential to know the outcomes of perpetuating those myths.

Loss of capital

The first and most obvious consequence is loss of investment or trading capital. This loss often means hard-earned savings or loans obtained at significant cost for retail investors. The most common culprits are leveraged investments, day trading, and penny stocks. Crypto has recently caused many young investors to lose large amounts of capital—the more speculative the approach, the higher the risk.

Tax and legal issues

Day traders may get caught up in pump-and-dump schemes perpetuated by TikTok creators. Those who make outsized gains may be subject to taxation laws. Some crypto investors, for example, who profited from ICOs at their peak or helped promote unregistered securities on social media, are facing legal investigation. 

Missed opportunities and fewer options

Refrain from discarding proven savings and investment instruments in favor of riskier ones to avoid missing out on the benefits of compound interest as you grow older. Employer contributions, an essential boost to retirement accounts, may be missed in favor of risky investments—loss of capital and lost time result in fewer investment options as you retire.

For Better Financial Decisions, Go Beyond TikTok For Advice

The wide availability of financial content is generally a positive thing. While TikTok is an engaging entertainment and social connection platform, there are better sources for in-depth personal financial advice. Many finance content creators sell the allure of quick wealth and success, leading neophyte investors to risky decisions that may have lasting consequences. 

Rather than relying on social media as the sole source of information, it is best used as a springboard for more intensive learning. Those looking for better personal financial advice should look to other sources offering quality information, many of which are accessible or highly affordable.

Online courses from accredited institutions on education platforms, financial books written by reputable authors, established financial news outlets, specialized investment apps, and government resources offer more in-depth learning on personal finance and investing. When it comes to allocating your money, knowledge is power. Fact-checking, continuing education, and informed decision-making are all crucial to achieving financial security and success.

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Her Forward


Her Forward is a US news publication founded by Michael Peres (Mikey Peres) in 2021. Our publication is dedicated to bringing you the latest news and insights on female entrepreneurs and leaders.