Research shows that social media significantly influences consumer behaviour. Shaping the way we communicate, consume information, and spend our money.
According to the 2023 Commence Report, which surveyed individuals aged 16-24, millennials and Gen Z (born between 1997 and 2012) are 51% more inclined to make impulse purchases online.
With platforms like Instagram, Facebook, TikTok and Twitter dominating our daily routines, it’s important to understand how social media influences our spending habits and what we can do to reduce any negative effects.
The impact of peer pressure on spending
One of the most significant ways social media affects our spending, whether consciously or subconsciously, is through peer pressure. The constant stream of posts showcasing friends’ and influencers’ latest purchases, luxury vacations and experiences can create a sense of inadequacy and the need to keep up. This can lead to unnecessary spending as we look to match the lifestyles portrayed online.
The role of influencers
Influencers play a pivotal role in shaping consumer behaviour on social media. With their vast followings and persuasive power, influencers can drive sales and promote products to a wide audience. While this can be beneficial for businesses, it can also lead to excessive spending among followers who feel compelled to purchase recommended products, even when they are not necessary.
The UK’s Advertising Standards Authority (ASA) has been working to ensure transparency in influencer marketing, requiring individuals to disclose when their posts are sponsored. However, the attraction of seemingly genuine endorsements can still lead to impulse purchases and financial regret.
The Fear of Missing Out (FOMO)
FOMO, or the Fear of Missing Out, is another powerful driver of spending induced by social media. Seeing others enjoy new products, experiences, or trends can create a sense of urgency to participate, leading to hasty purchasing decisions. This is particularly prevalent in the fashion and travel industries, where visual content can evoke strong emotional responses.
A survey by Barclaycard found that FOMO causes 15% of UK consumers to spend more than they can afford. The desire to be part of the latest trends or to experience what others are sharing online can lead to financial overextension and regret.
Overspending on shopping and holidays
Social media platforms are rife with advertisements and sponsored posts that encourage shopping and travel. The visual nature of platforms like Instagram and Pinterest makes it easy to showcase desirable products and exotic destinations, influencing users to spend money they may not have planned to.
A Bankrate survey found that almost half of social media users (48%) have made an impulse purchase based on what they saw online, and 68% of these buyers regret their decisions.
Strategies to combat social-media induced spending
While social media can have a significant impact on our spending habits, there are several strategies we can implement to mitigate its effects and regain control over our finances.
- Limit social media engagement: Reducing the amount of time we spend on social media can help decrease exposure to persuasive content. Setting specific time limits for daily social media use can prevent mindless scrolling and impulse buying.
- Unfollow influencers and brands: Curating your social media feed to exclude accounts that promote excessive consumerism can reduce the temptation to make unnecessary purchases. Focus on following accounts that inspire and uplift without encouraging spending.
- Implement a budget: Creating and sticking to a budget is essential for managing finances effectively. Allocate specific amounts for discretionary spending and avoid exceeding these limits, even when tempted by social media posts.
- Practice mindful spending: Before making a purchase influenced by social media, take a step back and evaluate whether the item is necessary. Consider waiting 24 hours before buying to determine if the desire to purchase still exists after the initial impulse.
- Seek financial education: Educating yourself about personal finance can empower you to make informed decisions. Many resources are available online, including budgeting tools and financial literacy courses. See our blog on Improving Financial Literacy.
- Use ad blockers: Installing ad blockers on your devices can help reduce the number of targeted advertisements you see while browsing social media. This can decrease the likelihood of impulse purchases driven by ads.
- Focus on experiences, not things: Shift your focus from material possessions to experiences and relationships. Engaging in activities that bring joy and fulfilment without the need for spending can reduce the desire to keep up with online trends.
Social media undoubtedly has a huge impact on our spending habits, often encouraging unnecessary and impulsive purchases. By understanding the ways in which social media influences us and implementing strategies to counteract its effects, we can regain control over our finances and make more mindful spending decisions.
Limiting social media engagement, curating our feeds, budgeting, and practicing mindful spending are all effective ways to resist the pressures of online consumerism. Ultimately, the key to overcoming social media-induced spending is to prioritise financial health and personal well-being over trying to match the lifestyles portrayed online.
