School might've given us great opportunities to learn a wide array of subjects. But for many people, finance was not one of those topics. And, in true TikTok fashion, users have been creating videos that seek to fill in some of those holes.
NGL, some of the money advice we found on TikTok was actually pretty solid. We did the research to make sure the facts presented really were facts. However, keep in mind that there is no one-size-fits-all when it comes to personal finance. Before making any big decisions, you should ALWAYS do your own research and consider your own situation as it relates to your financial goals.
Here are just a few TikToks you might be able to learn from:
1.This video from @sarafinance on a couple of ways to build a healthy credit score:
The TikTok explains that regardless of what your credit limit is, you should try to spend no more than 30% of it. This strategy paired with paying off your balance in full each month can help you maintain a good credit score.
2.This video from @paydaypursuit on some practical ways ~young adults~ can get started on their personal finance journey:
The TikTok outlines three key steps to take: 1) open up a credit card and always pay the balance in full each month, 2) open up a Roth IRA account for retirement and contribute even a little each month, and 3) invest in yourself.
It goes on to explain opening up a credit card is important because much of your credit score is determined by your length of credit history. (Just make sure you maintain good spending habits!) They also touch on the idea that you can start saving for retirement with just a part-time job and set yourself up to eventually retire as a millionaire. Lastly, they suggest that when you're young, you have a great opportunity to invest in yourself (by gaining knowledge through books, for example) since you don't have many financial obligations.
3.This video from @themoneymovement giving a crash course on what the heck a mortgage is:
The user explains that when you want to purchase a house but can't afford the total cost, you pay what you can toward the house (aka, a down payment). Then, you ask the bank to put up the rest of the money (the loan amount). Afterward, you pay that amount back to the bank; once it's repaid in full, congrats, you now own the house!
It's probably a good idea to have even the faintest understanding of how a mortgage works, considering most people end up paying one for at least 15 years. Just sayin'.
4.And this video from @vanessaaragonrealtor that walks you through how much you REALLY need to save to buy a property (hint: it's actually more than you think):
The TikTok breaks down the math for purchasing a house that costs $450K. They note that some down payments can be as low as 3% thanks to some loan programs, but in this example, they make calculations based on a 3.5% down payment, which roughly equates to $16,000.
But wait!! They also explain you'll need to save up for closing costs, which can be around 2–3% of the loan payment (loan payment = cost of home – down payment). So 3% of a loan payment of $434,000 means closing costs will run you another $13,000. NOW, all that's left to do is add in the price of a home inspection (which is usually $400–$600). This all adds up to a grand total of saving $29,600 to buy a $450K home.
Also important to note: The user adds a disclaimer noting it'd also be wise to save a little extra for any emergencies that may pop up (like if anything breaks or needs replacing ASAP). And while putting down 3% might be enough to get you a mortgage, saving more can help you avoid private mortgage insurance and lower your monthly payments. Test it out for yourself using this down payment calculator.
BTW, we asked homeowners to spill the tea on some home-buying mistakes they made (so future you doesn't have to!).
5.This (adorable) video from @yoquierodineropodcast giving brief a overview of some common investing accounts:
The user runs through the purpose of five different accounts: a brokerage, 401(k), IRA, HSA, and 529 — all while their two delightful dogs walk along to the beat of "Break My Stride."
Here are their brief descriptions of each investment account: • Brokerage = a taxable account with no restrictions on withdrawals. • 401(k) = a workplace retirement account. • IRA = a retirement account for anyone who earns income. • HSA = an account with tax-free money for medical expenses. • 529 = an account with tax-free money for education.
Honestly, I didn't even know about ANY of these when I was in college!
FYI, we put together some guides on 401(k) plans and HSA accounts that'll help you dip your toe into the world of investing for the ~future~.
6.This video from @kianadanial that perfectly sums up what an emergency fund is and why you should probably start building one ASAP:
The TikTok explains an emergency fund should cover six to eight months' of your essential expenses (think the amount of money you spend on food, rent, mortgage, commute, etc.) saved in an account or asset that can easily be withdrawn from for cash (aka, one that's highly liquid).
An emergency fund can provide a financial cushion if you lose your income. When you're just starting out, a good goal could just be to save up to $1,000. From there, you can gradually work your way up to a loftier savings balance.
7.This video from @calltoleap that breaks down the difference between a credit card and a debit card:
They summarize that using a credit card is like borrowing money from your bank to make a purchase; you'll have to pay that borrowed money back. However, using a debit card means that you can only spend the money you already have in your checking account.
They also note that using a credit card can help build good credit, but you have to use it responsibly.
8.This video from @marktilbury on some ways to use credit cards responsibly:
The TikTok shows the importance of not maxing out your card and paying your balance in full each month. In this example, a person is given a credit limit of $1,000 but decides only spend up to $100, because using more than 10–30% of your available credit could damage your credit score.
The user also stresses the importance of not just paying the minimum each month and says they'll pay off the balance in full to avoid accruing interest.
9.This video from @projectaeronaut that introduces this positively revolutionary idea that 22-year-olds don't need to drive the newest, fanciest car:
According to this band of friends, buying a new car straight out of college is one of the worst investments you could make, since its value depreciates as soon as you drive it out of the lot! Their solution: Buy a used car. You'll save a ton of money that way.
If you're still stunned, Dave Ramsey — a personal finance adviser and radio show host famous for his 7 Baby Steps money plan — created a handy chart that breaks down the (sad, painful) way in which your car depreciates in value.
10.And this video from @itsjossfitness that gets real about the true costs of buying an expensive car:
The TikToker gives the following advice to her 18-year-old self: Don't buy a car you can't afford! You just need a vehicle that gets you from Point A to Point B! Financial freedom is more important than the validation of your peers!
The user then explains that even three years after financing their car, they're still paying 19% interest and repayments of $380 per month...plus ANOTHER $300 per month for insurance.
11.This video from @femme_financial explaining this thing called a high-yield savings account and how it could give you a better return on your money:
The user explains that many traditional banks pay you "literal pennies" for stashing your cash in their accounts. Buuut, high-yield online savings accounts are able to give clients a higher returns. Marcus by Goldman SachsandAlly Bank, for example, provide an annual percentage yield (APY) of 0.5%, compared to 0.01% from some other banks. This means you may earn more in interest just by keeping your money in these accounts.
Online banks are typically able to offer a higher percentage yield compared to traditional banks because they don't have the overhead costs that a lot of brick-and-mortar banks have. Thus, they're able to give their clients a lil' somethin' somethin' just for banking there.
FYI, these interest rates are variable and can change depending on the interest rates set by the Federal Reserve. So while some high-yield savings accounts are currently offering a 0.5% APY, they may offer more or less in the future.
12.This video from @budgetbrospodcast with a clever yet digestible way to save a little money every day:
Here's their method: Look at your checking account balance at the end of the day. Take the last digit and move an equivalent amount to your savings account. Repeat this process every day for a week.
After one week, they've saved $24. But the REAL magic happens after doing this every week for a whole year. They'll have saved approximately $1,248.
If you're hungry for more ways to save, take a look through our roundup of money-saving challenges. We're talking everything from saving every $5 bill you come across to the viral 100-envelopes challenge.
13.This video from @spencer.barbosa describing some smart "hacks" for how to save money as a student:
The user points out that spending money on food and drinks can really add up, and provides a simple yet clever tip for when your friends want to order pricey drinks: Just order water instead (since it's usually free everywhere). Oh, and ask about student discounts wherever you go!
Their other tips include buying makeup from TJ Maxx and Winners (a Canadian fashion brand), opening a tax-free savings account, and simply prioritizing your needs.
14.This video from @spencerhochhaus that shows (rather than tells) the value of sweet, sweet compound interest:
They pose the question: "Would you rather have 1 million dollars today or a penny doubled every day for 30 days?" The instant million bucks might sound appealing, but as they point out, the penny option can make you more money thanks to the power of compound interest. They explain that compound interest = where your money grows exponentially and earns you interest on top of interest.
And in case you're curious, they also point out that if you doubled your pennies every day for 30 days, you'd end up with over 5 million dollars — $5,368,709.12 to be exact.
15.This video from @grahamstephan on the ups and downs of the stock market:
The user pulls up a graph as an example of how, over a short amount of time (like a month, six months, or even a year), the market may appear to have sudden big dips. However, over a longer period (like five years), the market dips and rises but has an overall upward trend. Bottom line: It's normal for the stock market to rise and fall.
The user also touches on the idea of holding long-term, which is a passive investment strategy.
The market soars and falls; that's a given. It's easy to get caught up in the emotional commotion of the market, and it may even lead you to make a risky investment you can't actually afford or sell a security for a loss instead of a profit. So while it's interesting to see what strategies work for others, it's important to always do your own research before making any financial decisions.
16.This informative video from @yourrichbff on the pros and cons of Roth IRAs (individual retirement accounts):
The TikTok lists the advantages of a Roth IRA: You won't have to pay taxes when you withdraw money in retirement, you don't EVER have to withdraw the money if you don't want to, and you can withdraw your contributions — not your gains — at any time without penalty. Then, she goes into some disadvantages: You can only contribute post-tax income, the yearly contribution limit of just $6K is quite low, and you can't even have a Roth IRA if you make more than $140K per year.
Who knew saving for your ~golden years~ could be so easy.
18.This video from @cedonifrancis with a few ways to get a head start on your financial future while you're still in college:
The TikToker points to five main pieces of advice: Get a credit card to help you build credit, open a high-yield savings account, create a Roth IRA and contribute at least $20 per month to start, perfect your elevator pitch, and learn how to budget.
The user recommends cards like the Discover Student or Capital One Student cards and high-yield savings account such as Ally and Marcus by Goldman Sachs. But as with any financial decisions, it's important to do your own research to figure out what's right for you.
19.And finally, this video from @delyannethemoneycoach explaining the basics of a 401(k) account and company matching:
They explain your employer may offer you a 401(k), a retirement account that gets invested in the stock market. Then, they give an example of an employer match program: If an employee asks for 3% to be deducted from their paycheck and added to their 401(k), the company will match the 3% contribution and the employee won't pay taxes on the money until it's withdrawn.
Lastly, they note that employees can often choose how they want their funds invested through a "menu" of investments. They also recommend speaking directly to your 401(k) provider about deciding what's best based on your goals.
Still wanna learn more? Here are some facts about 401(k)s you should probably know sooner rather than later.