Amid recent news the U.S. House of Representatives passed a bill that, if signed into law, could lead to TikTok being banned in this country, advisors have another reason to discuss the pros and cons of social media with millennial and Gen Z clients.
Regardless of what becomes of TikTok in the U.S., the reasons have been there for advisors to address social media with younger clients because a plethora of surveys and studies confirm millennials and Gen Zers too often turn to social media for help with budgeting and investment and tax advice.
Making matters worse are some of the other goings on in the world of social media. There are a lot of “influencers” offering up downright poor financial advice. Then there are the ones that are “faux rich,” leveraging accoutrements such as private jets, fancy cars and lavish homes – in many instances all are rented for a day – to pass themselves off as rich.
Problem is, many millennials and Gen Zers take the bait and believe those influencers really are highly affluent. Worse yet, they measure themselves against the influencers, coming away with feelings of financial inadequacy – a condition known as “money dysmorphia.”
Money Dysmorphia Is Drag on Young Clients
Typically, financially induced stress is viewed through the lens of not having enough to meet basic needs, inadequate retirement savings or carrying too much debt. Money dysmophia is a different type of scourge, but it has elements of lacking/longing.
For advisors laughing at the concept of money dysmorphia, don’t. Think of it as a new version of “keeping up with the Joneses” –one that afflicts nearing 30% of Americans, according to a recent Credit Karma survey.
“Of those who experience money dysmorphia, 82% say they feel behind on their finances. That’s compared to 29% of respondents who don’t struggle with the same financial insecurity,” notes Credit Karma. “Zooming out, nearly half (48%) of Gen Z and 59% of millennials say they feel behind financially, likely contributing to feelings of financial inadequacy. While many admit to feeling behind, 59% of respondents also report feeling financially stable, demonstrating the distortion between one’s perception of their financial stability and the reality of their situation.”
Not surprisingly, many of those grappling with money dysmorphia face financial struggles. As Credit Karma observes, 37% of those that admit to dealing with money dysmorphia have less than $10,000 in savings while just 23% have more than $30,000.
Comparison, Obsession Making Younger Clients Miserable
Due in part to the aforementioned social media problem, younger clients are comparing themselves to influencers and becoming obsessed about being rich. There are detrimental consequences to those behaviors, confirming advisors have good reason to say something to a client that’s frustrated about their financial progress.
“This was especially true for younger generations with 44% of Gen Z and 46% of millennials admitting to being obsessed with the idea,” adds Credit Karma. “More than half (54%) of respondents who experience money dysmorphia say they’re obsessed with the idea of being rich, compared to just 12% of those who do not struggle with the condition. Despite obsessing over the idea of extreme wealth, 52% of Americans say they don’t think they will ever be rich. That number jumps to 69% when looking at Americans with money dysmorphia.”
The point: a whopping 95% of those with money dysmorphia admit it’s negatively affecting their personal finances. That’s all the reason advisors need to get involved.