Generative AI is everywhere these days, and many people remain hopeful it will take on increasingly difficult tasks, freeing humans to focus on more important — or more fun — activities. Generation Z, which refers to those born between 1997 and 2012, are among the most enthusiastic supporters of AI so far.
More than 3 in 5 Gen Zers have used AI to help them manage their finances, including creating budgets and choosing investment strategies, according to a new BMO Harris survey. But before you give it a try, you need to know a few things to keep yourself and your money safe.
How AI can help you manage your finances
Generative AI has some impressive capabilities, some of which could make it a valuable assistant when it comes to managing your money. Some possible use cases include the following.
Learning more about a financial topic
There are plenty of online articles from trusted sources about the pros and cons of savings accounts vs. checking accounts, for example. These are great places to start if you’re looking to learn more about a financial topic that’s new to you.
But sometimes you don’t know the exact question you need to ask. Maybe you want to know which type of bank account is best for you to put your annual work bonus in so you can earn the greatest possible interest rate over the next year. You could type that into a search engine, but you may not find the results you’re hoping for right away. Generative AI, though, is built to handle questions like these.
The caveat here is that AI should be your starting point, not the only source of your research. Perhaps you search the question mentioned above and you learn about certificates of deposit (CDs) for the first time. You could ask generative AI to tell you more about CDs, but you should also do more research on your own using content written by humans — ideally ones who know what they’re talking about.
Crafting or modifying a budget
Generative AI is skilled at data analysis, so it could be useful for things like creating a budget. Let’s say you have a spreadsheet listing all of your income and expenditures from the last several months. You could give that to a generative AI program and have it analyze your spending across various categories.
This might open your eyes to some behaviors you want to change. Perhaps you didn’t realize how much you were spending on takeout until the AI showed you. You may decide you want to reduce your spending there so you can allocate more money to savings. You can tell this to the AI, and it can work with you to build a budget you’re comfortable with.
But again, you can’t just trust it blindly. You would think basic math would be easy for AI, but it’s not always. You may have seen the news articles lately showing that AI can’t even count how many Rs are in the word “strawberry,” so you may want to double check its calculations to make sure they’re accurate.
What not to do when using AI to manage your finances
AI’s development is exciting, and its capabilities will hopefully grow over time. But for now, it remains important to avoid the following behaviors.
Trusting everything AI says
As mentioned above, AI makes mistakes, sometimes very basic ones. These can be hard to spot because AI always sounds confident in its answers. It’s important to verify the accuracy of any information it gives you before following its financial advice.
Keep in mind that AI typically has a cutoff date for its training data. That means it may not know about more recent events. This is why it might not be a good idea to rely upon AI for help picking specific stocks you want to invest in, especially if you’re looking to make a quick buck. If recent information has significantly changed the company’s valuation, the AI’s advice could lead you astray.
Entering too much personal information
Generative AI companies train their AI models on data from their chats with users, and human reviewers often read this information as part of that process. So you definitely don’t want to give out your Social Security number, bank account numbers, credit card numbers, address, or any other information someone could use to scam you.
Give the AI the least amount of information required to do its job effectively. If you’re not satisfied with the results, you may want to enlist the help of a human financial advisor who can give you advice that’s tailored to your situation.
