Beyond the Numbers Financial Advisor eNewsletter
Social Media Can Pressure Millennials to spend too Much
With the benefits of compounding, those who get an early start on their savings and investments are far better positioned to achieve financial security and a worry-free retirement. Young people today have many challenges to saving—including student debt, soaring housing costs, and daily expenses. But their social media habits may be yet another obstacle on the road to financial independence, according to recent studies.
Half (49%) of Millennials (age 23-38) say their spending habits are influenced by images and experiences shared by their friends on social media, according to a recent national survey. Inundated by images of exotic travel, the newest fashions, and trendy restaurants, half of Millennials also confess they are convinced to spend more than they can afford.1 Another survey revealed that almost six in ten (57%) make unplanned purchases because of what they see on social media.2
Social media has escalated the game of “keeping up with the Joneses” to new levels. This is little surprise given how pervasive social media has become in recent years. On average, Americans spend over two hours a day engaging with social media sites and apps.3 And while social media is great for showcasing the wonderful experiences friends are having, it does little to reveal the financial consequences of excessive spending. In fact, seven in ten (72%) Millennials say they’re at a loss to understand how their friends are able to afford all the experiences and purchases they portray on social media.1
As more and more of us fall behind in our retirement savings, “keeping up with the Joneses” can be a dangerous game. The majority (59 percent) of Americans live paycheck to paycheck, and nearly half (44 percent) typically carry a credit card balance.1 Millennials are particularly challenged to save: Those under age 35 do not save at all, on average. In fact, younger people actually have a negative savings rate of one and a half percent.4
To tone down the influence of social media, experts advise keeping a proper perspective of the “idealized” versions of your friends’ lives as portrayed on social media, and turning to other sources that can help inspire, educate, and keep you financially on track to achieve financial independence.
1. Charles Schwab, Modern Wealth Survey, 2019
2. Allianz Life, Generations Ahead Study, 2018
3. GWI, Media consumption in 2019
4. Moody's Analytics