More Americans are turning to AI chatbots for financial guidance, but experts warn that artificial intelligence still has limitations when dealing with complex money decisions. While AI can provide useful general advice, financial professionals caution that users should verify recommendations before making major financial moves.
Americans Turn to AI for Money Advice
A survey from data analytics company JD Power found that 40% of respondents had used AI to help manage their finances within the previous three months.
More than one-third of those users said they found AI advice helpful in making smarter financial decisions, a result comparable to the percentage of people who found guidance from their banks useful.
Some users rely on AI as an everyday financial planning tool. David Kendrick, an IT manager in Ohio, uses ChatGPT for questions ranging from managing home equity debt to deciding whether additional income should go toward paying down debt or investing in a Roth IRA.
Although Kendrick still meets with a human financial adviser annually, he said AI provides reassurance and helps reduce financial stress.
AI Helps With Basic Financial Decisions
According to JD Power, one of the largest groups using AI financial advice consists of people who are financially overextended, meaning they may have tight budgets or existing debt.
These users often ask AI for practical ways to reduce expenses, such as finding cheaper alternatives for everyday purchases.
Research from Taha Choukhmane, associate professor at MIT Sloan School of Management, found that AI performs well when providing broad financial guidance.
The study found AI generally encourages behaviors such as increasing savings, investing more consistently, and reducing risk exposure as people get older.
Researchers simulated the long-term impact of financial decisions based on AI recommendations and found that following the advice could improve overall savings outcomes.
AI Struggles With Complex Financial Situations
While AI can provide helpful general guidance, researchers found that it does not always match recommendations from human financial experts when dealing with complicated situations.
For example, when asked about handling a job loss, AI suggested spending reductions that researchers considered overly aggressive and failed to recommend using emergency savings designed for financial hardships.
The research also found weaknesses in areas such as portfolio rebalancing and noted that AI sometimes recommended different levels of financial risk depending on the user’s gender.
AI Can Provide Confident but Incorrect Answers
Financial experts say AI advice is most useful for basic financial education and for advanced users who provide detailed information and carefully structure their questions.
However, users asking more complicated questions without enough context may receive inaccurate recommendations.
Danielle Harrison, founder of Harrison Financial Planning, tested an AI model by asking how she should structure a business after her husband joined her firm.
The AI initially recommended creating an S corporation, but after Harrison provided additional information, it changed its recommendation to forming an LLC.
Harrison said that without her own financial knowledge, she may have accepted the original answer even though it was incorrect.
Financial Experts Warn About AI Limitations
AI systems can sometimes create false information, make incorrect assumptions, or provide overly confident responses, a problem often referred to as hallucination.
Sharon Bloodworth, CEO of White Oaks Wealth Advisors, said AI has been inaccurate in many situations she has reviewed, but she believes the technology will continue improving.
She also sees AI as an opportunity to expand access to financial planning for people who may not have access to professional advisers.
Users Should Treat AI as a Financial Tool
Even enthusiastic AI users recognize the importance of caution. Kendrick avoids giving AI direct access to his financial accounts and instead provides limited information for analysis.
He also understands that AI models can sometimes be overly agreeable and tell users what they want to hear rather than challenge their assumptions.
For financial decisions involving significant amounts of money, experts recommend using AI as a supporting tool rather than a replacement for professional financial advice.
