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Kiplinger
Kiplinger
Business
Howard Dvorkin

AI Wants You to Overspend on Gifts This Season: What to Do About It

A male investor looks frustrated as he looks at paperwork, thinking he's made some common investing mistakes.

Artificial intelligence (AI) can do many things faster than a human being can — and that includes spending our hard-earned cash.

AI may advise you to spend all your money, but only because you're asking it to

The Pew Research Center conducted a poll and learned that nearly half (49%) of Americans feel AI will help them "find products and services they are interested in online." Only 15% said consulting AI regarding spending in this way hurts more than it helps.

That might be why an Ipsos poll shows that 37% of Americans "are already using AI to manage their finances."

But here’s the doomsday result from a new poll by my company asking 1,000 Americans about the seemingly innocuous topic of holiday shopping: If AI recommends ideal gifts for loved ones, almost two in three (65%) will spend more — and one in four will finance their purchases.

You read that right. If AI tells us to buy pricier gifts than we originally planned, we’ll heed those suggestions. Over 70% of respondents will spend up to $900 more due to AI holiday shopping recommendations, the poll found.

Even worse, if we can’t afford that, we’ll finance it. And we’ll do that in the worst ways possible, according to my company's poll:

  • 80% will put their AI-recommended gifts on their credit cards. Though not all debt is bad, with card interest rates hovering around 20%, that means for every $5 you spend, you’re handing $1 to your credit card company.
  • 65% will use Buy Now, Pay Later (BNPL). BNPL has become massively popular because you don’t get charged interest. But miss one payment, and you’re hit with late fees that quickly add up.
  • 58% will use high-interest payday loans. Payday loans have their place. That’s emergencies only. Not holiday shopping. The federal Consumer Financial Protection Bureau has reported that many payday loan customers fall behind, so they take out another payday loan — and soon they owe more than they originally borrowed.

If you’ve noticed the numbers don’t add up to 100%, that’s because respondents will use more than one of these methods to appease their AI overlords.

Here's the problem: NerdWallet reported in October that "nearly 3 in 10 Americans who used credit cards to pay for holiday gifts last year (28%) still haven’t paid off their balances." My fear is that AI will only make that worse.


Kiplinger Advisor Collective is the premier criteria-based professional organization for personal finance advisors, managers, and executives. Learn more >


Trusting AI isn’t intelligent

If some random person told us to spend $700 to $900 more this holiday season, we’d scoff at them. We’d wonder what their angle is.

Indeed, we’ve all developed a healthy skepticism about advertising, online reviews and social media influencers. We constantly ask ourselves, “What’s in it for them?”

Yet AI isn’t altruistic. It’s programmed by people with the same motivations we’re cynical about. I urge you to doubt AI advice just as much as you doubt flesh-and-blood advice.

Then there’s the simple fact that AI still isn’t very bright all the time. I just typed my name into ChatGPT, and it listed me as the author of one book I wrote in 2005 but not the one I wrote in 2013. Most importantly, it doesn’t list my current job. It’s not like that was a recent career move. I’ve been leading in that role for 11 years.

So trust AI as much as you’d trust a random stranger.

How to outsmart AI and save

I even asked ChapGPT, “How can I save on holiday shopping?” The answers were all very obvious: “Make a budget,” “Compare prices” and “Shop sales.”

What wasn’t there: Talk with your friends and family. Be honest and tell them that inflation has taken its toll on your finances — and most likely theirs, too. Set a price cap on gifts.

One thing AI can’t understand is emotion. We overspend during the holidays, not out of greed but guilt. We’re not (just) spending on ourselves, but on those we love. If we’re turning to AI to figure out what to buy them, it’s time to go old-school and have a face-to-face conversation.

AI can’t grasp this concept: I care less about my college-age son and daughter buying me a new shirt than I do spending time with them. If they want to get me something, it can be a handmade coupon offering to go out to dinner sometime. I have a feeling many parents feel the same way. We don’t need AI to tell us that.

Let’s outsmart AI this holiday season by doing what it can’t: looking our loved ones in the eye and asking what’s really important.

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