Social media has become the primary source of financial advice for digitally native young adults—roughly 40% of Gen Z and 36% of millennials say they learn about financial topics from these platforms.
According to a recent study by FIS, less than a quarter of younger adults receive financial advice from their financial institution. Despite being aware of its drawbacks, younger generations still rely heavily on social media for financial guidance. In fact, roughly half of Gen Z respondents acknowledged that social media isn’t a reliable source for financial advice. These platforms often feature financial messages that are distorted, unrealistic, and fragmented.
“As our Pulse survey reveals, younger generations are increasingly turning to social media for financial advice, which poses a challenge for traditional banks,” Hashim Toussaint, GM of Digital and Open Banking at FIS, noted in an email to PaymentsJournal. “But while this may initially cause concerns, banks should actually see this as another medium through which they can connect to their existing customers and attract new customers to their brand.”
The Financial Picture
Younger generations are less likely to invest in traditional investment products. The report found that most young adults keep their money in checking accounts and digital wallets. While digital wallets can be a useful tool for managing and digitizing finances, they are not always the safest place to hold funds, as they often lack FDIC insurance, unlike bank accounts.
Although most Gen Z consumers may not have the most optimized financial outlook, they are actively engaged. The FIS survey revealed that Gen Z opened more financial accounts in the past year than any other generation surveyed.
Embracing Dialogue
Gen Z is especially in play with financial institutions as they age into adulthood and branch out on their own. While most Americans are loyal to their financial institution, 66% of Gen Z and millennial respondents said they would switch banks if a better offer came along.
Young adults are also tech-savvy and actively engaged with their finances, but often unsure of the proper financial steps to take. They are hungry for guidance, but oftentimes the only place they find it is online.
“Banks are uniquely positioned to empower their customers with personalized and data-driven advice, deepening those relationships while bringing them the guidance they are desperately seeking to ensure their financial well-being,” Toussaint said. “Consumers still place their highest levels of trust with their financial institutions, so it is now up to those institutions to embrace social media as a new way to dialogue with them.”