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Admittedly, I might not be the best person to address the topic of #GirlMath because I’m neither female nor a TikTok user, but I’ll do my best.
In short, #GirlMath is a phenomenon that’s gained infamy/notoriety on the social media platform, underscoring the dangers of accessing financial advice on social media. Courtesy of TheStreet.com’s Veronika Bondarenko, below is a good illustration of #GirlMath and its origins.
“Popularized by three radio hosts on New Zealand's FVHMZ radio station over the summer, the term refers to justifying one's frivolous purchases and shopping pick-me-ups — one TikToker used the example of how paying for something in cash ‘feels like I got it for free’ while another described how she ‘returned something at Zara that was $50, bought something else that was $100 [so] it only cost me $50.’
It doesn’t take a genius to understand that in the above scenario, the shopper is still at a $50 deficit, but the problem is many clients and prospects in younger demographics may be taking #GirlMath advice at face value. Advisors should certainly be aware of that discouraging trend.
Some #GirlMath Myths Are Dangerous
#GirlMath is endemic of the perils of investors relying too heavily on social media influencers for financial advice. Consider two of the common #GirlMath myths: Cash isn’t “real” money and “free” money is attained when returning items to a store.
These are important myths for advisors to dispel because data confirm women are increasingly prominent parts of, if not leaders in, the consumer spending equation. Many retailers give store credit, not refunds, when items are returned so that money is spent, far from me and the consumer is arguably enticed to spend more. As for the reality of cash, well it’s very real and while there is something to be said for using cash over credit, those benefits don’t diminish the reality of the former.
Then there’s the notion that breaking up purchases is more cost effective than one large shopping, say five $100 expenditures over a single $500 tab.
“I probably don’t need to explain why this thinking is flawed,” notes Morningstar analyst Amy Arnott. “And I suspect that many consumers (regardless of gender) fall into the trap of avoiding big-ticket purchases, just to end up buying multiple things that add up to the same amount.”
Another #GirlMath myth that needs dispelling is the assumption that buying something on sale today creates “free” money down the road. It’s mostly flawed for ominous reasons.
“The idea behind this one is that you can justify an expense now if it helps you avoid spending a larger amount later,” adds Arnott. “For example, buying a winter coat that happens to be on sale during the sweltering summer months.”
Some #GirlMath Myths Aren’t Really Myths
Arnott highlights a few examples of #GirlMath myths that, in reality, could be justifiable. Those include splurging on expensive jewelry, high-end fitness classes and pricey gym memberships. In the case of the latter two examples, there are clear health and personal wellness benefits. Regarding, jewelry, it’s an alternative asset with long-term price appreciation potential.
Speaking of alternative assets, there are handbags. Of course, not all are investments, but if a woman buys, say, a $1,000 bag and uses it almost daily for two years, there’s value in that proposition.
On a related note, and I don’t know if it’s making the rounds on TikTok, the iconic Hermes Berkin bags are some of the best investments in the world, alternative and otherwise. They are, however, extremely expensive and require “real” money.
Related: Advisors Should Discourage Clients from 401(k) Loans