Swipe, Click, Invest: Danger in the Crypto Era.
We welcomed guests to stay over at our holiday home yesterday. It was a lovely sunny day in the low 80’s and we spent our time at the beach. They're a young couple we're very close to who are getting married next week. We are looking forward to attending their wedding. They are a very sensible duo in their late twenties with good jobs, they also managed to get on the property ladder through their own hard work. I'm very proud of them; they have achieved a lot.
After our BBQ, I was chatting to the groom-to-be, and being who I am, I steered the conversation towards financial matters. I was surprised to learn they have a crypto position that had originally been a savings fund for a new car. They are now stuck with their current older car because of poor performance with the crypto asset. Some influencer was the catalyst for buying into this unregulated area he sheepishly admitted. I would consider this young couple “poster children” for their generation and if they've been impacted by the crypto social media vortex, what about others not as sensible?
As an observer of the financial world, I'm increasingly concerned watching the younger generation, smartphone in hand. It's not just the social media; it's how that tiny device dictates their financial lives, especially when combined with cryptocurrency's allure. Thankfully for this young couple it's only a temporary setback and a valuable lesson learned.
While I realise the financial landscape has drastically changed beyond recognition since I was that age. I do think financial decisions were more deliberate. We'd visit a bank or advisor, or read a newspaper, allowing time to reflect. Now, with smartphones ubiquitous, every moment can be a financial interaction. Banking apps, trading platforms, and social media feeds are a tap away, blurring leisure and financial action. This constant digital tether promotes the real possibility of short-sighted decisions, making it hard to commit to long-term goals like pension contributions or in this case saving for a car. Research even suggests smartphone financial choices are more impulsive.
This always-on connectivity makes my cautious approach to personal finance seem ancient. My thinking around pensions was akin to a marathon, a consistent drip-feed allowing compounding to work its slow magic. Today, that prudence is often drowned out by "finfluencers" – self-proclaimed gurus dominating social media. They flaunt luxury, subtly linking success to obscure digital assets like crypto, using intimate feeds to create false trust.
This narrative is dangerous. Crypto assets are highly volatile, largely unregulated, and you can lose everything. Yet, these influencers often downplay risks, or worse, promote "pump-and-dump" schemes. They hype a coin, watch its value surge as trusting followers buy in, then sell their own holdings, leaving their audience with losses. Social media algorithms, designed for engagement, prioritize sensational content – a crypto fortune story is far more "engaging" than sensible pension or savings advice.
What troubles me most is the impact on long-term financial planning. Why commit to regularly saving for a house deposit when an influencer promises tenfold returns on a new token in months, instantly visible on your phone? This shift from patience to instant, speculative gains could be catastrophic for a secure footing in life. Money meant for compounding and saving is exposed to extreme volatility, often disappearing.
Many young people don't realize cryptoassets are largely unregulated, meaning protections from financial regulator's is nonexistent . If an exchange collapses, there's no safety net.
Previous generations before the digital age built retirement on prudence and in general a skepticism of "get rich quick" schemes. Many in this generation face constant digital temptation, amplified by the smartphone, to gamble their future. My earnest hope is that they develop the critical thinking to choose legitimate advice over social media's siren song, protecting their money for the life they truly deserve.
With regards to my young, soon-to-be-wedded friends, after a long discussion over the evening pointing out the difference between investing and speculation and other wide-ranging aspects of finance, I'm very confident they're on the right path to success due to their own sensible efforts and perhaps a little nudge from myself. I wish them well on the long road ahead.
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