How social media is affecting your spending

Social media use has been linked to our mood, self-esteem and even sleep. Research shows that it can also be linked to our spending.

For example, one study found that social networks, particularly Facebook and Instagram, can motivate impulsive buying behaviours. They also act as a source of inspiration that may trigger buying.

But how does social media affect our spending?

Advertising

Sites like Facebook and Instagram have evolved from just being platforms for social networking and photo sharing. They are now powerful advertising tools. We only need to look at our social media feeds to realise how businesses use targeted advertising to try to expose us to their products or services. Targeted posts are effective at getting us to spend because they’re often developed based on our demographics and even our behaviours.

Fear of missing out

Social media creates a tendency among users to compare their lifestyle with those of others. This comparison can cause a fear of missing out or FOMO.

A study found that one in two teens and one in four adults in Australia experience FOMO because of their social media use.2 Our anxiety about missing out often leads us to buy and consume just to fulfil the urge to keep up with everyone else.

Encouraging imitation

Images of products or aspirational lifestyles posted on social media by people we respect or admire might influence us to spend unnecessarily or indulgently. This happens when we look to them for cues or guidance when we don’t know how to act and simply copy what they’re doing. Psychologists call this social proofing.3

Seamless shopping experience

Social media platforms also encourage spending by providing a seamless shopping experience.

For example, Facebook enables retailers to sell on the platform itself, and Instagram lets them add links to products and services mentioned in their posts so users can purchase them online.

This makes it extremely easy to spend. In a survey of Australian university students’ spending habits, 43 per cent of respondents cited the seamless in-platform shopping experience on Instagram and Facebook as a major trigger for how much they spent via social media.4

Being smart with spending

Social media can help us make better choices by exposing us to more products and services and enabling us to learn about other people’s experiences using them. But it can also influence us to spend unnecessarily or impulsively.

By setting financial goals, you can make smart choices with your money. Your professional financial adviser can help you get started by creating a plan and budget to help you secure your financial future.

1. Aragoncillo, L, 2018, ‘Impulse buying behaviour: an online-offline comparative and the impact of social media’, Spanish Journal of Marketing, accessible at: https://www. emeraldinsight.com/doi/full/10.1108/SJME- 03-2018-007
2. Australian Psychological Society, 2015, ‘Stress and wellbeing: How Australians are coping with life’, accessible at: https://www. headsup.org.au/docs/default-source/default-document-library/stress-and-wellbeing-in-australia-report.pdf?sfvrsn=7f08274d_4
3. Psychology Notes HQ, August 2015, ‘What is the Social Proof Theory?’, accessible at: https://www.psychologynoteshq.com/social-proof
4. UniBank, May 2018, ‘How social media is really impacting student spending habits’, accessible at: https://www.unibank.com.au/ about/member-news/2018/may/how-social-media-is-impacting-student-spending

Source: IOOF