Balancing budgeting, debt management, and retirement investing can feel daunting, but artificial intelligence may lend a helping hand. Numerous AI-powered tools are available to assist you in managing your personal finances, including chatbots, robo-advisors, apps, financial assistants, and search engines.
As more AI-driven tools emerge, you might find yourself contemplating their utility for financial decisions—or perhaps you’re already utilizing one.
It’s essential to comprehend the risks and opportunities of leveraging AI for your financial management.
Do: Pursue foundational financial education
According to Molly Nelson, a certified financial planner from Missoula, Montana, and the founder of The Money Coven, a financial community for women, AI can be beneficial for enhancing your understanding of financial subjects.
“When you’re in search of fundamental financial education, AI is terrific for clarifying concepts or definitions that may confuse you,” Nelson remarks.
Foundational education may encompass topics like budgeting, estate planning, or understanding insurance.
Neslon also points out that ChatGPT—an AI tool that responds to your prompts—can serve as a resource for financial education. For example, you can pose multiple queries regarding a financial subject you wish to learn about and request tailored answers or real-life examples that resonate with your learning style.
One significant advantage of chatbots is their ability to facilitate two-way dialogues. This means the chatbot can act as a sounding board or thought partner, complementing other resources, such as financial professionals, books, or reputable content from financial platforms.
Even when using AI tools for educational purposes, always verify the information you receive.
Don’t: Seek investment advice
Many people likely find investing to be intimidating. This reality might make it tempting to use AI tools for guidance on the best stocks or cryptocurrencies to invest in. However, Nelson suggests that this could be a risky approach.
She advises caution when seeking investment advice from AI, as it could provide generic information. This is particularly true for those who may not be skilled in framing the prompts they present to the bots.
The specificity and clarity of your prompts can significantly impact the quality of the responses. The more detailed your query, the more refined your answers are likely to be.
“AI tools won’t consider various factors like your assets, financial obligations, or debt repayment needs. This is where consulting with a human can be invaluable,” Nelson states.
Some may wonder if robo-advisors, which utilize AI for investment management, are an exception. The answer is nuanced.
Robo-advisors can be a viable choice for some, as they frequently charge lower fees compared to human advisors and can quickly generate an investment portfolio based on your responses to their questions. However, they do not take your entire financial situation into account or provide personalized financial advice in the way a human would.
Do: Seek assistance with budgeting
Establishing an efficient budgeting system can be labor-intensive, particularly if you’re starting from scratch. AI can streamline some of the more tedious aspects of budgeting, such as parsing through transactions, according to Anthony DiMaggio, co-founder of Candlestick AI, an AI-driven investment platform in New York.
“AI can automate that process, sifting through information on your behalf,” DiMaggio explains. “It reduces the effort required on your part while still yielding the same outcomes and assisting you in better managing your budget or finances.”
Numerous tools leverage AI to address budgeting needs. For instance, Cleo is an AI budgeting application that offers budgeting plans, sends payment reminders, and monitors spending. Many general budget apps have begun to integrate AI features to enhance their functionalities, notably through chatbots.
Beyond apps, AI chatbots can be invaluable for budgeting aspects like analyzing spending habits, pinpointing areas for improvement, and offering suggestions. However, Nelson advises caution when considering recommendations, noting that AI tools generally excel at providing quantitative data rather than qualitative, which is crucial for budgeting since it accounts for personal values and emotional triggers.
“If someone relies solely on AI for budgeting without personal context, it may unintentionally eliminate expenses that are essential to them,” Nelson warns.
Don’t: Hold unrealistic expectations
For hands-on investors, AI might offer substantial time savings in asset research and analysis. However, it’s still advisable to verify any information before proceeding.
Ultimately, while AI can serve as a beneficial partner in managing certain aspects of your finances, it likely won’t provide the level of personalization necessary to help you achieve your financial goals.