How AI can help you manage your finances (and what to watch out for)

In recent years, many personal finance applications have started offering artificial intelligence (AI) tools as an affordable alternative to human money managers. But do they always provide the right advice? 

Many apps leverage AI to offer users a more consumer-friendly overview of their finances by automating savings, predicting expenses, analyzing spending trends, and identifying anomalies like fraud. An October 2024 Experian report found that 96% of those who’ve tried AI-driven finance apps (many of whom are millennials and Gen Z) reported having a positive experience with the technology, noting that it can demystify and improve financial health. 

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However, AI remains an unregulated technology, and a model is only as strong as its training. While AI can deliver big-picture insights to those who can’t afford personalized money managers, it has drawbacks. Here’s what to know if you’re considering using an AI finance tool. 

How AI can help financial literacy 

The main ways AI benefits financial management are data analysis at scale and personalization without the professional adviser price tag. A human financial adviser develops personal recommendations for their clients over time for a much higher fee; AI, on the other hand, can give users that bespoke experience by quickly ingesting and analyzing years of transaction data, usually for a few dollars. Your best bet is to use AI tools that help you draft a personalized budget or break down your spending habits. 

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AI tools can also automate intimidating or tedious financial tasks that users may not consider attempting otherwise, such as negotiating their bills — a service that AI finance app Cleo offers. While that feature does appear to help lower certain bills, that’s not because the tool is offering advice, per se. By drafting the email that initiates the negotiation, Cleo is simply lowering the barrier for entry many feel when tackling overwhelming financial management tasks — similar to using ChatGPT to help with an essay outline. It’s more a function of empowerment than a technological advancement. 

Overall, however, a chatty, friendly-sounding bot capable of simplifying your expenses into graphs and plain language is a valuable tool in the world of personal finance, which can feel complicated and inaccessible to many. If you’re just starting out, it may make developing your spending habits easier and more enjoyable. 

What to watch out for

As Reece Rogers of Wired experienced, AI apps like Cleo and Bright are supposed to give users financial advice, helping them reach their money goals. Ultimately, however, the interactions Rogers describes with both apps indicate that the chatbots were less interested in instilling behavior changes than in upselling him subscriptions and short-term cash loans, which often had fees associated with them. He described those suggestions as feeling like the bot was taking advantage of his desperation, encouraging him to spend in a way that contradicted his established goals.

This isn’t an AI-specific problem. The difference between an AI adviser and a human one (or bank) may not be that great. Like other businesses, many financial institutions are incentivized to upsell users and exploit vulnerabilities towards their bottom line. As Rogers points out, an AI assistant may be just as good (intentionally or unintentionally) at predatory lending simply because it can more quickly analyze your personal behavior and identify your weak spots — basically, it can automate questionable advice. 

Yes, AI financial products cost less than human money managers. But what you save in labor costs may be redirected into fees for specialty training the model wants to offer you. 

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The conversational nature of a chatbot can give users the impression they’re engaging with an entity that’s truly invested in their financial well-being. But all AI models are programmed with an objective. Just like any other tech product, finance apps have to be profitable to exist — after all, that’s the reality that shuttered everyone’s favorite, Intuit Mint. 

Additionally, research suggests LLMs provide the most accurate and useful financial advice based on how well they’ve been fine-tuned or supplemented with finance-specific models. Not all AI apps provide clarity on the strength of their model, which may vary between AI chatbots from smaller start-ups versus legacy financial bodies. 

Generative AI is still known to hallucinate and is limited to what its dataset contains. That’s why experts caution using ChatGPT for investment advice, for example. 

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Take any advice a chatbot gives you with a grain of salt; consult another source and verify any claims it makes before moving your money around.