Gen Z is spending a lot of their time on TikTok but unfortunately, there’s a lot of fraudulent financial advice floating around on the platform.
In a series of TikTok videos that went viral earlier this month, Patricia Milan, the user behind the account, Business Women University, boasted about securing $150,000 in cash to buy an Airbnb unit by maxing out her credit cards. The plan, as she explained to viewers, was to pay off her debt using the proceeds from her rental. A second video gave advice on how to obtain high credit card limits by creating a series of circular transactions within her own companies—which is, in fact, illegal in many jurisdictions.
That conceit has proven a pretty alluring promise on TikTok, where TikTok videos tagged with the hashtag #wealth have been viewed 55 million times in the last month, according to the platform. Those tagged with #millionaire have been seen 69 million times in the last 30 days, while #financialfreedom videos have been watched another 20 million times. There’s just one problem: A recent study from the stock research platform WallStreetZen found that 63% of stock-related videos on TikTok were misleading. Worse yet, 95% do not contain any disclaimers about investment risks.
Some of the more questionable TikTok guidance includes channeling all your household expenditure through an S-corp. to avoid taxes, taking a family vacation every year through your business, and hiring your children on salaries of $12,000 to help them be tax-free. “It feels really shitty to do it, but it’s kind of how you avoid paying taxes,” says the TikTok user Julia Hurley in one video. However, the IRS’s own website suggests that S-corps and their shareholders may be liable for some taxes, and the fraudulent use of S-corps to avoid taxes that otherwise ought to be paid have been under the IRS’s microscope for at least 10 years now. “It’s a very common money-laundering scheme,” says Whalen.
Kieffer advises taking a breath before following social media advice, and checking vetted resources, such as those offered by FINRA. And it’s definitely worth remembering that when it comes to finance, unlike other aspects of our lives, the maxim that social media can amplify and exaggerate has never been truer.”
[Stokel-Walker, Chris]
Brainrot is a popular Gen Z term used to describe low-quality, short-form content that populates TikTok, Instagram reels, and YouTube shorts. TikTok has a seemingly endless supply of this type of content, including but not limited to TikTok financial advice. This article addresses an increasingly popular style of video. It often less than minute videos of people sharing their life hacks, and strategies on how to make lots of money with ease. In reality, a majority of this advice is just blatant fraud. However, these videos do succeed at a few things. This type of video is engaging and communicates information in bite-sized pieces that are easy to understand and remember. What can we learn from this? How can we use the success of these fraudulent financial advice videos to help communicate safe, sound, and legal advice to young people as they take charge of their finances?
Stokel-Walker, Chris. “63% of Financial Advice on TikTok Is Misleading, One Study …” Fast Company, www.fastcompany.com/91015787/63-of-financial-advice-on-tiktok-is-misleading-one-study-found-users-love-it-anyway. Accessed 2 Sept. 2024.
