More people turning to AI chatbots for financial advice. Can you trust it?
From budgeting advice to investment strategies, more people are turning to artificial intelligence for help with money.
Asking financial advice is now the second most common use for generative AI platforms, like ChatGPT, just behind health and wellness, according to a new survey conducted by Intuit Credit Karma.
The survey finds 66% of Americans now say they've used AI to seek out financial advice, with the number rising to 82% among Millennials and Gen Z.
But can you trust the results? Before you act on any recommendations, experts say it's important to know the risks.
Thomas Nitzsche with the non-profit credit counseling agency Money Management International likens generative AI chatbots to an enhanced and more interactive Google search.
"It's a new way to do research and find your options," Nitzsche said. "I like it because it does have that empathy and it does tend to ask follow-up questions."
Nearly two-thirds of GenAI users surveyed said they seek financial guidance from AI often, while three in four said they feel it lets them ask financial questions they'd be too embarrassed to ask anyone else.
A little more than half of respondents in the survey admitted they'd made a poor financial decision or mistake based on the information they received.
We tried it ourselves with a theoretical scenario and prompted ChatGPT to generate a monthly budget strategy for someone in their mid-30s, living in Philadelphia, with $25,000 in credit card debt, a gross monthly income of $8,000, and $10,000 in monthly expenses.
ChatGPT responded, "You're in a tough but fixable financial situation." It then provided what it classified as a "realistic" budget strategy focused on not going further into debt, cutting expenses, paying down debt, and building an emergency fund.
It also suggested categories where spending could be slashed and provided targeted cuts, listed options to pay off credit card debt and ultimately suggested talking with a nonprofit credit counselor for help.
Nitzsche said GenAI should be seen as a coach that can point you in the right direction, not a definitive calculator.
"It does prompt you to sort of take the next step, which is what we find a lot of our clients suffer from," he said. "It's that sort of financial decision paralysis, of like, 'I'm just overwhelmed and I just don't know what to do next.'"
But GenAI has its limitations, Nitzsche warns. It can give incorrect answers or recommend services that might not be reputable. ChatGPT's disclaimer tells users to "Check important info."
When we asked Google Gemini if it was better to invest for retirement in a Roth IRA or a traditional IRA, the results included a disclaimer that read, "I am an AI, not a financial or tax advisor. This information is for educational purposes only. You should consult with a qualified financial or tax professional to evaluate your personal situation before making any investment decisions."
Ultimately, Nitzsche said, it's important still to do your homework.
"Do your due diligence, especially if you're going to be working with a company or if it suggests a particular strategy," he said. "Get some validation of that from another source, too."
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