What to know before turning to AI for financial advice

Increasingly, many people are turning to AI for answers when they have a question or could use some guidance. Given that finances are a major area where both questions and a need for advice can arise, it's no surprise that artificial intelligence is being faced with human financial queries.

A poll published by the credit bureau Experian in late 2024 found that already, 67% of Gen Zers and 62% of millennials are using AI to help with financial management in areas like saving and budgeting, investment planning and credit score improvement. Many people report having a positive experience, but there are still some caveats to keep in mind — and action steps you can take — in order to ensure you will have a profitable exchange with AI too.

How can AI help you in your financial life?

AI is generally most reliable when you're looking for some straightforward number crunching or simple answers. For example, this may include asking AI to do tasks like "create a budget that helps you save a particular amount of cash" based on details you provide about your typical monthly bills, said CNBC, citing Christina Roman, a consumer education and advocacy manager at Experian. You might also tap AI to break down a complex financial topic or analyze financial statements or spreadsheets.

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Where AI can "fall short" is "when it comes to more complicated areas like investment advice and tax optimization," said CNBC. While you could still use AI as a "starting point" on these topics, you might want to work through the specifics elsewhere, such as with a financial professional.

Are there risks to using AI for financial advice?

A major risk of using AI is that most platforms will "collect various data from you," said Kiplinger. Because of this, "sharing too much information with AI can be problematic," as "there are no guarantees your information will be safe."

Another problem: AI is not always right. "Experts warn that large language models (LLMs) are still prone to misinterpreting numerical data, especially in contexts rich with figures," said Investopedia. When it comes to "incorrect budget projections or investment performance," that "could result in actual losses."

How can you avoid pitfalls when using AI?

There are some steps you can take to use AI more safely — and accurately — as an ally in your financial life:

Be selective about what you share. Due to the possibility of AI data collection or a possible data breach, it's smart to be selective about what you share. You might "sanitize prompts by using anonymized or hypothetical data rather than your real personal information," said Investopedia.

Check your settings. Depending on the AI platform you use, you may be able to disallow it from saving certain information or using your data to train its models.

Double-check the answers. "If you plan to use AI for your finances, make sure to check the answers you get against other verified sources," said CNBC, citing recommendations from experts. Consider it as a step in your research, rather than the final answer.