The Rise of 'Financial FOMO' - Are You Saving Just Because Everyone Else is?

Of all the acronyms in finance, FOMO may be the most damaging one. Financial FOMO relates to people buying financial products and services simply because they feel they have to, in an effort to follow other people’s steps.

The psychology of saving trends

This can often come through in FOMO saving, or even FOMO investing, and this has been driven by the rise in financial influencers. We’ve written about the importance of financial influencers before but herd mentality in personal finance is certainly a trend many fintechs are eager to capitalise on. This is because money and finance are deeply psychological things – we want to save more, and invest more, to provide for our families, achieve our goals and essentially be successful.

Of course, you don’t need to be rich to be successful, but this equivalence is still being continually drawn and powered by financial institutions that of course want people to buy their savings products and become customers. The FOMO created ties into our psychological insecurities and fears. We don’t just want money, we need money – and FOMO puts this in front of us. This is compounded by what we see of other people’s lives on social media from our friends and peers – the sizes of their houses, their cars, how many holidays they go on. Faced with this, the social pressure to save can be intense.

We’ve already written about this, but this is why financial influencers – or finfluencers – are such an important part of marketing for banks, insurers and other similar institutions. Social media is where the audience is and on these platforms our psychology can be easily manipulated to make us think more about money and – more importantly – if we have enough. Hence the FOMO power of saving.

Savings envy

Here, there needs to be a reality reset. Ask yourself, is your saving genuine?

Nearly all experts and financial planners will agree that one person’s savings and investment plan is totally different to another’s. When a financial planner sits down with a client, they create a financial plan for them based on their individual circumstances – income, debt, outgoings, dependents, etc. This is all unique and catered to that individual. Therefore, the pressure to have savings is not always accurate or applicable. You may look at a peer or influencer and see they’ve saved more than you. This would instantly inspire some FOMO and peer pressure saving.

But does that person have the same income? Is their rent or mortgage the same? What if you have children or dependents, but they don’t? This can also be influenced by wants as well as needs – while others may enjoy going on holiday six times a year minimum, you may have a different outlook and one that extends to consumerism in general.

FOMO and anxiety are heavily interlinked. We see what others have and then judge ourselves, even if it’s on a subconscious level. Should I be saving more? Why am I so “bad” with money? Whatever the truth is, it’s very hard to save money. The FCA recently found that one in 10 Brits have no savings and around 13 million people have low financial resilience. This isn’t surprising given the challenges posed by cost of living, with high inflation raising the price of everything.

Beating financial FOMO

The impact of mindset on saving is hard to avoid, but it’s important to try and break up the psychology around money. Financial wellbeing and psychology are difficult enough without having to constantly compete with others!

Therefore, it’s key to have an objective outlook. As covered, everyone has different financial realities. You may see someone with a nice car and big house – good for them! But they may have had a different job, inherited money, got a good deal or – in a fact of life that is overlooked – may be living in credit. The taboo nature of money poses an interesting phenomenon here. People are increasingly talking about money and flaunting what they have, but no one wants to show the reality of this. For example, someone will inundate your newsfeed with holiday photos but they won’t cover the fact they had to take a loan out for it. Or that they have credit card debts and that the holiday isn’t a good idea! The point here is social media only shows us one aspect of the truth.

Therefore, scrutinise what people share and especially be critical of finfluencers. Remember, like all influencers this is their job and there is likely a commercial relationship somewhere. The finfluencer is probably only talking about a certain banking or savings product because they are being paid to do so. Look for disclaimers around this kind of content and remember the information you are seeing is carefully curated and scripted. This is one of the reasons the FCA is cracking down on finfluencers so heavily…

Fundamentally, your financial situation is YOUR financial situation. Any savings or investment products you use should be best suited to your situation, which is impacted by how much you earn, your regular outgoings and what you need and want from your money. Make a real attempt to block out the noise and do your own research – if possible, talk to a regulated financial planner. Also remember to be sceptical about social media as this will give you even more financial FOMO.