As the year 2024 comes to a close, economic challenges such as inflation, recession fears, and geopolitical uncertainties have become prominent concerns for many individuals worldwide. A Deloitte report indicated that a significant majority, 73% of respondents globally, are worried about rising costs, suggesting a growing sense of financial pressure on households. Amid these challenges, generative artificial intelligence (AI) has emerged as a valuable tool in personal finance, reshaping how individuals approach budgeting, investing, and financial planning. While these AI technologies present exciting opportunities, experts stress that they should be used to complement traditional financial strategies rather than replace them.
Generative AI, exemplified by tools like Google Gemini, Cleo, and ChatGPT, is facilitating simpler financial decision-making for users. Google Gemini, formerly Bard, can analyze vast datasets to generate insightful reports, forecasts, and personalized recommendations, while Cleo engages users with a blend of humor and actionable financial insights. Benjamin Susanna, Equiti’s global head of retention, emphasizes the transformative power of these AI tools in enabling more informed decision-making regarding finances. However, he cautions that the human element, consisting of careful oversight and risk management, remains crucial in navigating this evolving financial landscape.
User behavior in the financial sector is also starting to change due to AI. According to Barney Hussey-Yeo, the founder and CEO of Cleo, generative AI is being leveraged to rebuild trust in financial services—a sector historically associated with low consumer confidence. A report from Cleo reveals that a significant 74% of Gen Z and Millennials are open to using AI-powered financial tools. Contrary to stereotypes about their spending habits, many young Americans are actively saving for retirement and utilizing AI to do so. Hussey-Yeo points out that Cleo has introduced features like Save Hacks and Challenges, promoting smarter saving habits, and reports enthusiastic engagement among users, indicating a shift toward more proactive financial management through AI.
While AI tools offer the potential for improved financial outcomes, experts warn of several inherent risks. Generative AI often relies on publicly available data, which may not always be complete or completely accurate. This can lead to oversimplification of complex financial decisions, as noted by Yuval Shuminer, CEO of Piere. Misinformation poses a significant danger, and over-reliance on AI could result in individuals neglecting their own research or professional advice. Privacy concerns also emerge due to the sensitive financial data that these tools might require. Lee Provoost, Flagstone’s chief technology officer, recommends starting small when utilizing AI for financial management, as fully committing to automated assistance can feel uncomfortable for many users.
Experts agree that generative AI should be viewed as an assistant rather than a replacement in financial decision-making. While it can serve to automate repetitive tasks, the nuance and context required for significant financial choices still necessitate human expertise. Financial professionals, like Aleksandra Medina, co-founder of Frich, note that AI often provides generic advice rather than tailored recommendations that address an individual’s specific circumstances. Research from MIT Sloan also indicates that generative AI can excel in certain tailored contexts but may underperform without specific training. Ethics and trust are additional concerns, with the need for AI to follow fiduciary practices highlighted by finance professor Andrew Lo.
Looking toward the future, the role of generative AI in personal finance is predicted to grow, delivering speed, convenience, and enhanced personalization. However, experts caution that adopting AI tools requires critical thinking and informed judgment. Provoost remarks that we are still in an “early adoption” phase for budgeting AI, which carries risks. Despite these risks, there is optimism regarding the potential of AI to democratize financial services, making high-quality financial planning accessible to a broader audience. Nonetheless, the dangers posed by poorly trained AI models could lead to misinformation and financial instability, underscoring the importance of responsible usage and regulatory considerations as AI technology continues to evolve in the financial sector.
