AI Personal Finance Advice - Is It a Smart Choice?

7 MIN READ

It seems everywhere you turn, AI is taking over the scene, including AI in personal finance management.

How would you feel about receiving AI personal finance advice? A computer that tells you where to invest or spend, when your bills are due, or basic financial tips?

There's certainly a time and place for artificial intelligence in personal finance management.

However, letting it completely take over your financial management may not be ideal for anyone, as personal finance managers are the key to reaching financial success.

What Is Artificial Intelligence?

AI or artificial intelligence is a series of computer systems that essentially take over human tasks without human input. AI programs can understand language, detect patterns, and handle decision-making and problem-solving.

How AI Is Used for Personal Finance Advice

In finance, AI can read financial data, name patterns, and create recommendations based on predictions from financial data.

ChatGPT

ChatGPT uses deep learning to learn and generate human language. ChatGPT consumes large amounts of text data to provide financial advice and answer questions.

ChatGPT uses the information it learned to use the keywords in the question to provide financial or investment advice.

So far, ChatGPT has been paramount in providing basic financial information and helping users learn about important personal finance topics, including saving, investing, budgeting, and planning for retirement.

Some things you can do with ChatGPT for personal finance include:

Ask for information about specific financial terms you don't understand
Get credit monitoring and disputing assistance
Help to create a budget
Preparing for tax season
Retirement planning
Get money management tips to reach financial goals

Chatbots

A chatbot is a form of AI that converses with humans. You've likely already seen or used a chatbot on some of your favorite websites. When you type in a question and get what seems like an automated answer, it's a chatbot.

You can have a full conversation with a chatbot, getting instant answers to your questions.

Many chatbots respond to text or voice interaction and can provide personalized advice on personal finance, answer questions about products or financial terms, and help users make financial transactions.

AI Finance Apps

Personal finance AI apps can change your personal finance management for the better. These apps strive to automate your financial tasks to help you reach your financial goals and stop procrastinating.

1. Wizely

Wizely is a personal finance app based in India. Its mission is to be a one-stop shop for all things personal finance. The app encourages users to build good money habits and, in exchange, can earn rewards.

When you complete financial tasks on Wizely, you increase your Wellness Score and earn rewards. Your Wellness Score is based on your financial habits, including how well you save money, budget, spend and pay your bills.

2. Cleo

Cleo is a personal finance app that promises to get your finances straight. The app can 'roast' users by poking fun at their latest spending patterns or lack of savings to motivate them to make different financial decisions.

It can also be your biggest cheerleader, cheering you on when you make great financial decisions, or 'spot you' $250 with no credit check so you can avoid overdraft or late fees.

If you're looking for a way to build credit, Cleo helps you get a credit builder loan. It's a forced savings account, but they report monthly payments to the credit bureaus.

If you need to save money, Cleo offers round-ups from a linked debit card, 'fines' for spends you didn't want to make, and Smart Save, which is automated savings. All it takes are a few keywords, and Cleo does the rest.

3. Empower

Empower, formerly Personal Capital, is a free personal financial management app. You can get clear on your financial goals, handle retirement planning, and work on your budget.

Empower answers all your money questions, helps you oversee all financial accounts, and provides personalized recommendations to help you reach your financial goals.

The app is free, but you can upgrade to a Premier Investment account for DIY or done-for-you investments. They also offer wealth management services in tiers based on your total assets under management.

4. Acorns

Acorns was one of the first AI personal finance apps that encouraged users to 'round up' purchases, investing their spare change. It offered a great start for many people who couldn't afford to create robust investment portfolios.

Today, Acorns offers saving, investing, and learning in one personal finance app. When you save, Acorns has portfolios built by experts ready for your spare change.

You must have a $5 balance before they transfer the funds, and you can earn 'cash back' in the form of investments when you shop at partner retailers using your Acorn debit card.

5. Mint

Mint is one of the free personal finance apps that offers financial advice and helps users manage their finances in one place.

You can link your bank accounts, credit cards, investment portfolios, and loans to the app to see your financial health in one place.

Mint sends automatic notifications when bills are due so you avoid late payments or when automatic costs increase. You can create a free budget and get personalized financial advice to simplify decision-making.

Personal Finance Advice and AI - Is It a Good Idea?

It can be scary to trust a computer program with your finances. Your financial well-being relies on the answers the AI-powered financial assistant provides. Is it a good idea?

Managing personal finance is complicated, so any help you can get may feel like a gift from above, but there are certain limitations you should consider.

Advantages

Automated tasks - Bill paying, balancing your checking account, or tracking expenses is time-consuming, and most people don't like it. The fact that AI personal finance advice can handle this for you is positive.
Personalized advice - AI-based financial tools can read your personal financial data and provide financial or investment advice. The answers should be based on your current financial situation and future goals.
Guidance-based support - AI financial tools can read financial data and alert you of any issues or upcoming opportunities to consider.
Affordable - AI personal finance management is often free or cheaper than advisors, but the tradeoff is that you don't get human financial advice.
Teaches complex financial concepts - AI can provide financial education on complicated personal finance topics that they otherwise would forgo or muddle through to try to make decisions.

Disadvantages

No human interaction - When dealing with something as personal as finances, you want someone reassuring you that you're making the right decision.
Difficulty meeting regulatory compliance - Personal finance is an industry loaded with rules, and if a program isn't in compliance, it can cause them and their clients serious harm.
Potential bias - AI is only as good as the provided data. If the data is skewed, the advice on financial planning you receive will be just as skewed.

How AI Compares to Human Personal Finance Advice

So should AI replace human advisors, or should you only rely on human advisors when managing personal finances?

There isn't a right or wrong way to go about it. AI is somewhat new for personal finance management.

While it can be a powerful tool for financial literacy and omitting the daunting task of paying bills or creating a budget, there's always room for human advisors.

Who AI Financial Advisors Are Best For?

People who are comfortable using technology to manage their finances, want to increase their financial knowledge, and don't mind the lack of human touch may be a good fit for AI financial advisors.

They are also great for anyone on a limited budget, as many budgeting apps and other personal finance management apps are free or low-cost.

Who Human Financial Advisors Are Best For?

Human financial advisors are paramount in providing personalized recommendations based on personal needs.

They are best for anyone with a lot of money to invest or who likes visiting traditional financial institutions rather than dealing with their finances on an AI-powered device.

Related Article | 15 Questions to Ask Financial Advisors

The Bottom Line

AI personal finance advice can be good in some situations, but working with a financial advisor is always best.

The future of artificial intelligence is bright, but it likely won't replace the human version; we all need human advice when dealing with money.

If you have the best of both worlds, including machine learning algorithms and a knowledgeable financial advisor, you can make more informed financial decisions and reach your financial goals faster.

However, AI will not replace the benefits of human advisors as they provide the best financial advice.

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