The Do’s and Don’ts of Using AI to Manage Your Finances

Juggling budgeting, debt management and investing for retirement can be overwhelming, but artificial intelligence may be able to help with the balancing act. There are many AI-driven tools you can use to manage personal finances, such as chatbots, robo-advisors, apps, financial assistants and search engines.

As the list of AI-driven tools continues to grow, you may be considering using one for your financial decisions. Perhaps you already are.

It’s important to understand the risks and opportunities of using AI to manage your money.

AI can be useful if you want to get a better understanding of financial topics, says Molly Nelson, a certified financial planner from Missoula, Montana, who runs The Money Coven, a financial community for women.

“I think when you’re looking for basic education, it’s a great tool to use to clarify financial concepts or financial definitions for yourself,” Nelson says.

Basic education may include understanding how budgeting, estate planning or insurance work.

Nelson adds that ChatGPT — an AI tool that provides responses to prompts you input — can be used for financial education. For instance, you could ask multiple questions about a financial topic you don’t understand and ask it to adapt those answers to your learning style or provide real-life examples.

One of the benefits of chatbots is you can engage in two-way conversations. In other words, the chatbot can be a sounding board or thought partner you use alongside other resources, such as a finance professional, books or vetted content produced by financial platforms.

Even if you’re using AI tools just for general education, verify the information you’re getting.

Most people can probably agree that investing can be intimidating. For this reason, it might be tempting to use AI tools for advice such as the best performing stocks to invest in, or the best cryptocurrency to buy. However, that probably isn’t the best idea, Nelson says.

She says people should be leery about using AI for investment advice because it could end up giving blanket information. This could especially be the case if you’re not well-versed in forming prompts, which are the questions you ask the bots.

The prompts you use can affect the quality of the answers you get. The more specific and descriptive your prompt, the better the quality your answers are likely to be.

“They’re not going to take into account a person’s other assets, financial implications or implications related to their debt payouts or income. That is where talking to a real person can be the most helpful,” Nelson says.

People may be wondering whether robo-advisors are the exception to the rule since they help with investing and use AI. The answer: It depends.

Robo-advisors can be a good option for some, because they often cost much less than a human financial advisor and can put together an investment portfolio for you quickly based on your answers to questions. But robo-advisors don’t take your entire financial picture into account, and don’t offer personalized financial advice in the same way a human advisor would.

Budgeting can be time-consuming, especially when you haven’t yet established a system that works for you. AI can help automate some of the tedious aspects of budgeting such as sorting through transactions, says Anthony DiMaggio, co-founder of Candlestick AI, an AI-powered investment platform in New York.

“AI can be used to automate that process and sift through that information for you,” DiMaggio says. “So it’s reducing the effort outputted on your part, still getting that same result and helping you manage that budget or look at your finances or just get a better sense of things.”

There are multiple tools that use AI to help with budgeting needs. For instance, Cleo is an AI budgeting app that can provide a budget plan, send payment reminders and track your spending. Some general budget apps have started incorporating AI, too — through chatbots, for instance — to make their tools more efficient.

Apps aside, AI chatbots can be helpful when it comes to elements of budgeting, such as analyzing spending habits, identifying areas for improvement and providing recommendations. Be mindful of the latter, considering AI tools may be better at providing quantitative data than qualitative data, says Nelson. Qualitative data is an important part of budgeting because it takes personal values and triggers into account, she adds.

“If someone were to just hand their budget over to AI without knowing the person, it might just slash certain expenses that really for the person are non-negotiable,” Nelson says.

If you’re a hands-on investor, AI may be able to help you save time when it comes to researching and analyzing assets. But, you’d probably still want to verify any information given before taking action.

The bottom line is that AI can be a helpful partner in managing some aspects of your finances, but it likely can’t provide the level of personalization needed to help you achieve your goals.