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4 Ways Social Media Can Destroy Your Savings

Myke Educate
Myke Educate
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4 Ways Social Media Can Destroy Your Savings

Research is now showing a surprising truth: social media can make you feel more confident about money — but less competent when it comes to actual decision-making.


Why Social Media and Savings Don’t Mix

Recent studies highlight a worrying trend: people who spend a lot of time on social media make worse investment and money decisions compared to those who don’t.

They:

  • Trade far too often.

  • Take on unnecessary risks.

  • Believe they’re more skilled at investing than they truly are.

The real danger lies in the gap between subjective knowledge (what you think you know) and objective knowledge (what you actually know). This gap can quietly eat away at your savings.

1. The “Share Without Reading” Trap

A University of Texas study revealed a strange but alarming behavior: many people who share financial articles online start believing they understand the content — even if they never read it.

When you click “share” on a post about stocks or money tips, your brain tricks you. It convinces you that you’ve gained knowledge just by posting it. The research showed that those with the biggest gap between what they thought they knew and what they actually knew often kept dangerously high exposure to volatile stocks.

This illusion of knowledge can push you into risky positions without realizing it.

2. The Google Overconfidence Effect

The problem doesn’t end with sharing posts. Researchers have also identified something called the Google Effect.

When people search online for financial answers, they tend to “own” the knowledge as if it were theirs. Worse, they often forget they had to look it up in the first place.

This false sense of mastery leads many investors to take risks they don’t truly understand. They believe they’re making expert decisions, but in reality, they’re leaning on borrowed knowledge from a search engine.

3. The High Cost of Overconfidence

The financial impact of overconfidence caused by social media and internet use is massive.

A study in the Journal of Financial Planning (by Texas Tech and Auburn University) found that social media users are much more likely to make 10+ trades per month. That’s about one trade every other trading day.

And what were they buying? Not stable blue-chip companies — but microcap and penny stocks fueled by viral tips. History proves that frequent traders almost always underperform the market.

Even worse, a study from Ohio State University showed that overconfident investors were more likely to raid their retirement savings early.

  • Among the top 5% of overly confident investors, 37% tapped their retirement accounts early.

  • In contrast, only 5% of truly knowledgeable investors made that same costly mistake.

Early withdrawals come with steep penalties, lost growth, and in many cases, a ruined retirement plan.

4. The Closed-Mind Problem

Social media also creates a dangerous type of mental rigidity.

A study published in the Journal of Business Research found that investors who overestimated their knowledge weren’t just overconfident — they were closed-minded.

They filtered information to match their existing beliefs and ignored alternative viewpoints. In investing, this can be disastrous, since markets change constantly. If you can’t adapt, you’re more likely to lose.

What You Can Do Right Now

After more than 40 years of investing and financial advising, here’s one lesson I can share: don’t confuse good markets with good knowledge.

Wall Street has an old saying: “A rising tide lifts all boats.” Many investors mistake market growth for personal skill. But when markets turn — and they always do — those who felt like geniuses are often left broke.

Here are three actions to protect yourself:

  1. Stay humble. Don’t assume social media tips equal expertise.

  2. Keep cash ready. Saving some money aside helps in downturns.

  3. Take profits when times are good. Don’t wait until the tide turns.

Even Warren Buffett admits he can’t predict every market move. Neither can you.

Bottom Line

The next time a flashy “can’t-miss” investment tip pops up in your feed, pause. Remember that social media can destroy your savings faster than you think.

The smarter move? Close the app, pick up a book on financial fundamentals, or talk to a qualified advisor. Your retirement, your wealth, and your future self will thank you.

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