How social media can make us spend more and save less
Social media has made it easier than ever to stay updated on the lives of your friends and family members, but what many may not realise is that it can also lead you to splurge.
Seeing other people’s consumptions – be it a restaurant dinner, a new car or a trip to Bali – can encourage you to fork out some money of your own, a study has found.
Professors from the University of California and University of Toronto discovered that visibility bias leads people to spend more and save less, because they only see what others are spending.
According to one of the study’s co-authors David Hirshleifer, our consumption habits are influenced by the social interactions we are having. Because people talk about what they are doing, he said, they are more likely to share about their consumption than non-consumption.
Being aware of other people’s spending can lead us to make incorrect assumptions about their financial position as well as ours, the experts said. The heavy spenders around us may indicate that the future wealth prospects are positive, leading us to share the belief and increase our own consumption.
“That signal from my peers about what they think about the future, and any income growth, and their resulting actions kind of give me some kind of clue about my future,” Han Bing, another co-author of the study told the BBC.
This bias is exacerbated by social media, as people are more likely to share photographs of their new clothes or boats than their savings.
Being aware of the possibility of bias is the first step to prevent overspending, Hirshleifer said. “Psychologists have sometimes found that if one becomes aware of a psychological bias, that can reduce the bias.”
It can also be helpful to identify those who regularly share their spending habits on your social media feed and hide or mute their posts for a period. Joining thrift groups on social media can also keep you accountable and counter the excess effect from visibility bias by showing how others are saving rather than lavishing.
Have you been spending more since using social media? Let us know in the comments.