What You Need to Know About Using AI for Personal Finances
AI may make personal finance information feel more accessible.
AI can sound overly confident and personalized even when it's wrong.
If you use AI for personal finances, put guardrails and protections in place.
Should You Use AI for Personal Finances?
I'm a financial therapist, and I'm sweating a little just writing this blog post about whether people should use AI for personal finances. But according to a Plaid report, 55% of adults already use AI to answer financial questions, so I’d rather address it than pretend it isn't happening.
As a financial therapist who explores the intersection of money and mental health, I find that makes sense. Asking someone for clarity on a financial concept or tool can bring up embarrassment or shame, so asking ChatGPT might feel safer.
That said, we shouldn’t confuse “people are using AI for their money” with “AI is a reputable way to manage your money.”
* * Note: In this post and video, I’m not getting into the well-documented environmental, economic, mental health, or community-based risks of AI; I’m simply responding to the increasing rise of people using AI for their personal finances and offering insight on the pros and cons for that purpose * *
What Is AI, Anyway?
When I say AI, I mean generative artificial intelligence tools, particularly large language models (LLMs). Think of things you’ve likely heard of, like ChatGPT, Claude, Gemini, or Copilot.
Artificial intelligence isn't new, but these LLMs are trained on enormous amounts of text and data. When someone types a question, LLMs generate a response based on patterns they've learned from the information available to them.
For example, let's say you're comparing health insurance plans during open enrollment. You might ask AI, "What's the difference between a deductible and a copay?"
A few years ago, you probably would've typed that same question into Google, clicked a few websites, and read definitions to find an answer you understood. Now, AI can explain the difference relatively quickly, give you an example, and answer follow-up questions.
What Are the Benefits of Using AI for Personal Finances?
Despite my reservations, I can see why people are turning to AI for financial questions. There are real benefits, especially when we consider accessibility.
Making financial jargon easier to understand. Personal finance is full of confusing terms like deductibles, expense ratios, and credit utilization. AI can help translate complicated financial language into something easier to understand.
Making money questions feel less intimidating. A tool that doesn't roll its eyes when you ask the same question a third time can make financial education feel more accessible.
Preparing for conversations with financial professionals. You might use AI to generate questions for a financial advisor or to understand better what to ask HR about your retirement benefits.
There’s absolutely value in increasing access to financial education. But feeling comfortable asking a question doesn't guarantee an accurate answer, which brings us to some of my concerns.
What Are the Risks of Using AI for Financial Advice?
While AI can make financial information more accessible, it has significant limitations you should consider before trusting it with financial decisions. And because these tools can sound so confident and conversational, some of those limitations aren't always obvious.
AI can be overly confident in telling you what you want to hear. This is called sycophancy: an AI model can be overly agreeable, affirming your choices rather than challenging them.
Let's say you're deciding between two houses. House A is more affordable, but House B is closer to town, has a beautiful backyard for your dog, and has enough space to host your friends. If you describe House B more enthusiastically, AI may pick up on your preference and push or validate that choice.
AI can offer incorrect or outdated advice. This matters especially when you ask about things that change frequently, like tax laws, interest rates, or retirement contribution limits.
AI doesn't know what you don't know. AI can only answer the questions you know to ask, and sometimes you don't know enough about a financial topic to recognize what information you're missing. For example, if you fundamentally misunderstand how credit utilization works, AI might answer your question about credit scores without recognizing that you're confused about a foundational concept.
AI doesn't understand your entire financial life. Two people can have identical incomes, savings balances, and debt amounts while needing very different financial guidance. Our financial choices are influenced by our emotions, values, relationships, health, access to resources, and the systems we live within, and AI doesn't understand those circumstances.
AI Guardrails for Personal Finances
I know some of you are already using AI for financial questions, and rather than pretending that's going to stop, I'd much rather you have some practical ways to protect yourself.
Protect Your Personal Financial Information. Despite LLMs pushing integrations with your bank account, please, please, PLEASE don't enter sensitive personal information into an AI chatbot. Because of risks like data breaches and rogue AI agents, never enter your Social Security number, date of birth, bank account numbers, routing numbers, passwords, or detailed financial statements containing identifying information into an LLM. A good rule of thumb is to treat what you enter into AI with the same level of protection you would use on public WiFi.
Double-Check AI Financial Advice. If AI gives you information about taxes, retirement accounts, interest rates, or financial regulations, verify it and check the source date, too.
Ask AI to Challenge Your Assumptions. To reduce the risk of an overly sycophantic or agreeable bot, intentionally ask it to challenge your thinking instead of validating what you want to be true. This doesn't guarantee that AI will give you the right answer, but it may help you get a more balanced response. And as a financial therapist, I'm a big fan of creating space between our initial emotional reactions and our financial decisions.
AI Shouldn’t be Your Financial Decision-Maker. There's a difference between asking AI to explain a financial concept and asking it to tell you what to do with your money or manage it for you.
Know When to Talk to a Real Human. I understand that working with a financial professional can feel intimidating. But depending on your situation, that might mean working with a financial planner, tax professional, attorney, financial counselor, or financial therapist. These professionals bring something AI can't fully replicate: the ability to understand your situation, ask follow-up questions, notice what might be missing, and apply their professional expertise to your circumstances.
Should You Trust AI With Your Money?
People turning to the internet for financial information isn't new. What's changed is how we're accessing that information and how personalized the answers can feel. If AI helps you understand a confusing financial term, feel more comfortable asking questions, or prepare for a conversation with a financial professional, I can see the value.
But if you're using AI to validate risky financial decisions, make investment choices without verifying information, or replace qualified professional guidance, that's where I get concerned.
Remember that your financial well-being is about more than getting the mathematically "right" answer. It's about understanding how your money supports your life, your values, and what matters to you. On top of that, I have a hunch that all this AI use is only making people feel more behind, more decision-fatigued, and paralyzed by perfectionism. That’s why I’m such an advocate for bringing financial conversations into the open.
If you enjoy human connection and want to improve your financial wellness, that’s exactly what we do inside my Mind Money Balance Method™. The Mind Money Balance Method ™ is a four-week, community-supported financial wellness experience that helps you understand your relationship with money so you feel more confident, less stressed, and better equipped to take action.