Is Social Media Really Making People Spend More And Save Less?

Before we begin, meet Visage Vijay - a Toronto-based drug safety manager. She is planning for her holiday to Ireland with husband and at the same time she is willing to spend $3000 on a Chanel handbag. She came to know about the brand after seeing a lot of celebrities and influencers showcasing their products online and now she is almost obsessed about buying a Chanel purse for herself.

But that’s not all. Prior to this in 2017, Vijay had already spend spent a hefty amount on Prada bag from Italy. She just wants to make a statement with everything; from holidays to fine dining, taking classes or buying clothes. If she likes something offline, she follows the hashtags to have a fair idea about the value of it on the social media world. For her, this is just a part of life which is all coming at massive cost.

To explain the reasons of such choices in detail, a recent study was conducted by some professors at the University of California and University of Toronto. The results of their research showed that people are now more inclined towards spending instead of saving. That basically means people only look out for how their favorite celebs are spending and not what they are saving at the same time.

This together is changing our consumption habits and has already given rise to visibility bias as well.

But, what is visibility bias?

In order to define the term upfront, David Hirshleifer, one of the authors of the study and professor at Merage School of Business, UC Irvine, stated that visibility bias arise from how people interact within social settings. Most of the time they like to talk about what they are doing and that gives them an opportunity to highlight and share ways of consumption.

However, this increased awareness, especially when communication is not in person to person, can not only create greater visibility bias but also makes people assume about their financial position and future wealth in a completely wrong way.

Amplification

This brings us to another important concern of amplification. Bing Han, another author of the similar study and professor at Rotman School of Business, University of Toronto, explained that when people plan onto save, they again take cues from the social network they live in. A lot of them fall into their own trap by making a wrong guess about socio-economic situation being same for all.


That being said, when someone posts about an experience or thing on social media, they basically influence the people who are following them. Though we cannot exactly term the effect as forcing but just like a belief, they think about your content/posts if it is relevant to their interest.

Stephane Couture, assistant communications professor at Canada’s York University-Glendon further elaborated the cause by highlighting that this also became one of the prime reasons of why promotional culture is now sky rocketing on social media. Although the pattern of consumption was always there but social media is just amplifying the trends.

Promotion verses Practicality

While planning out her trip, Vijay also admitted that if she had just skipped the idea of a new designer handbag she could have then actually saved the cash for something more practical like furnishing her new home. According to her that is currently the requirement of their house as well. Besides that, saving is always a better idea than borrowing money in the hour of need.


A Toronto-based finance manager Parth Bhowmick had a more common story to share as Instagram makes him spend at least CA$200 ($150 USD) or more on food every month. In total, he dines out five times a week and that is all because of his friend who promotes restaurants on his Instagram account. The friend’s post indirectly lures him to spend more for better taste and experience.

Our social media feeds are full with glossy photos of our friends having fun – but how does that impact our wallets?
Photo: Eaters Collective

In the end, Bhowmick was just so surprised to see how he was spending so much on just to eat out. He is now of the belief that learning about cooking can help him satisfy his taste buds and save money as well.

Are we living in a self created bubble?

Until now, yes. With this study David Hirshleifer wants people to be more aware about their spending. In fact, as psychologists repeatedly tell that one can reduce their bias if they are aware of it, it is about time that people should think about their money more often. The filter-bubble of social media is attractive and can fool anyone at any given day. But as Stephane Couture expressed; in the end, it is our own reality that we all should definitely take care of.

Read next: Apple CEO makes Shocking Remarks about Users' Increasing Addiction with Smartphones!

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