Social media makes millennials broke - May 23, 2019
We all know people who are always on their phones and sharing every fancy moment they can. Is it annoying? Maybe, but they might be the victim and the cause of one very interesting thing: irrational overspending due to social media. Studies started to focus on the connection between financial decisions and these mediums, and found out scary things.
While some millennials are financially more savvy than most of their predeccecors, others are badly broke. Followers of FIRE are planning to retire early and saving up with absolute discipline (see: FIRE – the thing that leads to early retirement). Some millennials on the other hand are spending everything they have. There’s a simple (and scary) reason behind this.
Social media is a huge influence
According to a new study made by Scwhab, almost half of millennials “Spent more money than they can afford to participate in experiences with friends”. But this is not all of it: they are more curious about how their friends are spending money than how they save it. “The burden to ‘keep up with the Joneses’ has been part of our culture for decades, but it appears that social media and the fear of missing out (FOMO) have increased the pressure to spend”, said Terri Kalsen about the phenomenon.
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Another paper conducted by Varo Money found out that “nearly half of college-educated millennials (47%) spend between one and four hours a day on social media”. Why is that such a huge thing? Because“38% say they are more likely to make a purchase and 41% of people have made a purchase to feel better about their own lives, according to the survey”.
Endless spendings, nonexistent savings
How much do these millennials spend? According to Schwab, people spend $500 on things they don’t really need. All this spending leads to an important problem: many millennials don’t have any savings. 59% of people asked are living from paycheck to paycheck. What’s more, 44% “typically carry a credit card balance” and only 38% have an emergency fund.
The only thing that can make a bit of a difference for them is financial planning. Millennials who have any sort of financial map for themselves are far more able to save up monthly (78% vs 38%). They are more likely to have an emergency fund (68% vs 26%). Planners are also better at investments and are more financially savvy in general.
Social media and mental health
The rule of social media causes other, less obvious problems, too. There are more and more studies focusing on the connection between the usage of Facebook, Instagram, YouTube and mental health. Several studies have found that there’s a link between poor sleep, poor self-esteem, and generally poor mental health and social media usage. (Depression is also on the table, but that’s a more debated issue.)
All this makes this issue even more serious. If poor self-esteem (or mental health) is connected to overspending, everyone should be more cautious. Anyhow, as we see, planning and discipline is, again, a thing that can help a lot with finances. And this is not only true for millennials on social media.
Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving their personal investment goals on the long term.