Before I start talking about how social media can have a negative impact on your kid's financial future, I want to make it clear that this blog isn’t saying that your kids shouldn’t go on social media. That would be impossible in the world we live in today.
This blog is making sure you talk to kids about the 4 ways social media can stop you becoming wealthy, so they are prepared for the future. This will hopefully help them hold onto their money and become financially healthy and wealthy.
4 ways social media can stop your kids becoming wealthy
ONE: Keeping up with the Jones’
Throughout history, people have seen other people have nice things and then felt the need to buy the same things. Social media has super-charged the notion of ‘Keeping up with the Jones’’ in two ways.
First, the amount of time people are on social media means they are exposed to the Jones’ for a greater period of time and therefore the desire to keep up is constant and leads to people spending more and reducing their chances of becoming wealthy.
Second, in the past, people would compare themselves to their friends or neighbours. This usually meant comparing yourself to people who weren’t very different to you in terms of socioeconomic status. As a kid growing up, a friend might have got a new bike with fancy handlebars, and I’d say to my parents “Mum, Chad has a new bike, I want a new bike to be like him!”. Today, kids will feel they need so much more as they see others from around the world having things they don’t have. These kids might be from completely different backgrounds. You can imagine a kid saying “Mum, @RichKidPaul has a yacht, I need one to be like him!”.
This increased social pressure is why it’s so important we teach the next generation about the difference between being rich and being wealthy. They are going to see ‘Rich’ people all over social media, we need to let them know about being wealthy, as this is harder to see. To learn more about Rich vs Wealthy, please read my blog Rich Kids vs Wealthy Kids or get a copy of my book, Grandpa's Fortune Fables.
TWO: Hyper-tailored advertising
In the past, adverts had to target a broad range of audiences. This meant that in the past we’d see adverts, but most of them we ignored as they weren’t relevant to us. That is no longer the case due to social media.
We all know that social media companies sell data (that we give them for free) to companies, so they can target adverts at the people who are most likely to buy their product.
This means, as our kids are spending hours on social media, they are being bombarded with adverts which will be of interest to them. Especially as some adverts are hidden in the posts they see, e.g. product placements in videos. This materially increases the chances they’ll want to spend their money.
I wouldn’t be surprised that in the future if social media companies start using your photos to put you in the adverts. This means you’ll see adverts where you're wearing new clothes or eating at certain restaurants, which would likely lead to more spending. I hope this never happens!
I hope in the future that there will be a social media platform that is financed via a subscription fee rather than advertising.
THREE: Streamlined purchasing experience
When I was growing up, if I saw an advert on TV for something I liked, I had to wait until the weekend, convince my parents to take me to the shops, have the right cash available and then buy it. Whilst I was waiting for this opportunity, I usually forgot about it or found something that I’d rather have. This meant it was quite difficult to spend impulsively.
The whole buying experience has now changed materially. If you see someone wearing something you like (social pressure) or see an advert for a yellow umbrella (as the social media company knows it's raining where you live, and your favourite colour is yellow), then you can buy these things with a click of a button within the social media app. There is no need to wait until the next trip to the shops or going to the ATM.
The ease at which our kids will be able to spend money materially increases the chances that they spend, and therefore reduces the chances of them becoming wealthy.
This is why we need to ensure kids form the habit of saving at least 10% of all the money they receive (the first rule of wealthy) - at least this means they are saving some money even if they do end up spending the rest due to social media.
FOUR: A scammer's playground
A lot of people give so much of their personal data away when using social media. This is great for scammers as they can use this data to locate those people who they know will be easy to scam. They can also use data shown on social media to access private information.
Scammers are coming up with clever ways to entice people to give them more of their personal data. The classic example is when you see social media games (which are created by scammers) which say things like “Discover and share your unique Unicorn name. Simply enter your mother's maiden name (e.g. McBride) and your first pet’s name (e.g. Fluffy). It will then come up with a Unicorn name like Fluffy McBride”. Whilst this sounds like a bit of fun, you have given two really important pieces of personal information away, which the scammers can use to hack into your accounts.
We need to ensure our kids look after their personal data, so they aren’t targeted by scammers. Sadly, there are an increasing number of people getting scammed, and the scammers are targeting young people.
I recommend that you read my blog, How to teach your kids about scams.
I have no doubt my kids will be on social media when they are older. I’m not going to stop them, but I am already making them aware of how people end up spending more due to social media. I hope that with this knowledge, they will avoid falling into the same pitfalls that so many others fall into.
Please take the time to talk to your kids about these 4 ways social media can stop you becoming wealthy. These are:
Keeping up with the Jones’
Streamlined purchasing experience
A scammer playground
If you have friends who have kids that are always on social media, make sure you send them this blog. Better still, share this blog on your social media. The more people who are aware of these pitfalls, the greater the chances of the next generation growing up financially healthy and wealthy.
Thanks for reading (don’t forget to subscribe below).
p.s. To help your kids learn the difference between being rich and wealthy, and learn 'The 3 Rules of Wealth', then get them a copy of my book, Grandpa’s Fortune Fables here. You can also get a wholesale discount here.