Whether it came from a family member, social media influencer or certified professional, if you’re a millennial or gen Z who’s been burned by bad financial advice in the past year, you can take some solace in knowing you’re not alone.
When it comes to the kind of bad advice young people seem to be particularly susceptible to, advice-only certified financial planner Jason Heath has noticed an uptick in three major areas — real estate, self-directed investing and education.
“I think a lot of young people especially take this ‘fear of missing out approach’ when it comes to their money, which might drive them to buy property they can’t afford because people tell them (the price is) always going up,” he said.
“Or, they might have tried to get into the day trading thing during the pandemic, going all-in on a few stocks instead of holding a bunch of different investments so that they weren’t overly exposed to risk.”
Nearly 70 per cent of readers recently surveyed by financial lifestyle magazine MoneySense said they’ve lost money as a result of financial advice.
However, perhaps the most relatable issue for young Canadians is impractically approaching their financial planning education in an era of high interest rates and mounting student loan debt — something Dula Deb, a fourth-year social work student at Carleton University in Ottawa, knows well.
Though Deb had always made an effort to manage her finances responsibly and ensure a relatively steady income to independently support her education, she finished high school with a limited amount of money management know-how. As such, she turned to her older sister for guidance, who had already completed her degree by the time Deb was starting at Carleton.
“She kind of advised me that, even if I had good scholarships and was working 30 hours a week, I should still take out my loans even if I didn’t need them yet, since they’d be helpful throughout (my degree) and take away the stress of being in a bad financial situation if something happened that affected (my income),” she said.
Though this may not have seemed like bad advice to many — especially given the ability to build a better credit score by taking out student debt and eventually paying it off on time — by virtue of Deb’s limited financial literacy at the time, she took out almost $6,000 in loans without the knowledge required to responsibly use them.
“I went from being a big money hoarder and feeling guilty for spending $20 on a shirt, to spending it really irresponsibly, especially when I was under a lot of emotional distress from school or other stuff.”
Heath noted that though bad financial advice can come from anyone and anywhere, financial advice given by people who don’t have the training to “meet people where they’re at” can be especially problematic — particularly when looking at advice given by family members and online resources.
“Of course, there’s the chance that someone who isn’t professionally qualified and is giving financial advice could be totally factually wrong, or with online resources like social media influencers, be trying to sell you something,” he said.
“But I think what I would caution people most about when it comes to taking advice from friends or family especially is that even if a family member’s advice is good and sound, it might be good and sound for them or for somebody else, but not for you.”
As such, Heath noted the importance of thinking through the non-professional’s perspective, given they don’t have the same training and approach a professional might have.
“I think, in my case, my sister probably assumed that I would know how to handle all of these loans, and how to think about debt,” said Deb, “and even though I know where I went wrong now, I probably needed that extra explanation back then to avoid some of the mistakes I made.”
However, Heath also acknowledged the potential for shortcomings among professionals, too, and emphasized the importance of remaining vigilant regardless of where the advice was coming from.
“I would say that one of the biggest yellow flags in spotting bad financial advice is if you don’t understand what they’re saying, even after asking for clarification,” he said.
“But beyond that, if something sounds too good to be true, it probably is, as there’s not really a lot of shortcuts to financial success — it’s normally a slow-moving process when done right.”
“This can definitely happen even with a certified financial planner,” added Heath, “so it’s always important to do your research and compare sources.”
Nevertheless, Deb’s experiences have encouraged her to seek out professional advice for the first time in her university career in order to round out her new approach to personal finance.
“This whole situation has taught me how to actually manage my money in a way that’s realistic instead of falling on the extreme end of spending or saving,” she said, “and I’m excited to see where these changes will take me.”
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