How Americans spend their money is being influenced by social media and, for some, it’s hurting their wallets.
That’s according Schwab’s 2019 Modern Wealth Index Survey. The annual survey examined what 1,000 Americans ages 21 to 75 think about their saving, spending, investing and wealth.
And when it comes to the intersection of spending and social media, the survey findings are not good news.
Here are three ways social media is affecting Americans’ finances:
1. Keeping up with the Joneses
Schwab found that more than one-third of Americans admit that social media has influenced them to spend money on experiences — like the experiences their friends share on social media platforms.
The survey describes this influence as “social media envy.”
Terri Kallsen, executive vice president and head of Schwab Investor Services, says of the findings:
“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.”
Unfortunately, not keeping up with the Joneses is key to avoiding lifestyle envy in retirement. We cite it in “18 Moves That Will Help You Retire Early and in Style.”
2. Spending beyond their means
More than one-third of the Americans surveyed also admit to having spent “more money than they can afford” in order to participate in experiences with their friends.
Americans blame social media platforms, not people, however.
They rank social media platforms as the biggest “bad” influence on how they manage money. And they rank friends and family as the top “good” influence.
Schwab’s survey is not the first to note financially harmful effects of social media.
In a 2018 survey from Allianz Life Insurance Co., 55% of respondents reported experiencing fear of missing out and 57% said they spent money they hadn’t intended to spend as a result of what they saw on social media.
3. Focusing on spending over saving
More than half of survey respondents said they pay more attention to how their friends spend money than to how they save money.
In fact, 60% of respondents said they are at a loss to understand how their friends can afford the vacations and restaurant meals that they post about on social media platforms.
Perhaps unsurprisingly, many Americans are struggling to save. Schwab found that among survey respondents:
- 59% live paycheck to paycheck.
- 44% typically carry a credit card balance.
- Only 38% have an emergency fund.
They also spend close to $500 per month on “non-essential items,” on average.
Do you get “FOMO” when you use social media? Talk about it with us on our Facebook page.