How to use AI to help with personal finances, and a look at the risks

The lawmakers trying to mitigate risk from AI Tory MP Michelle Rempel Garner and independent Sen. Colin Deacon discuss how they're trying to mitigate AI’s potential risk to Canadians.

If you’re looking for a fast, easy way to manage your personal finances, artificial intelligence (AI) could help by serving as a virtual financial assistant. It can help you pay your bills, save or invest money, analyze your spending and even give you tips to help improve your credit.

However, AI is still experimental, prone to errors, and many regard it as potentially unsafe. While AI technology is arguably our generation’s greatest technological advancement, it may have a way to go before it can serve as a trustworthy financial management tool.

AI AND FINANCE: DOES IT ADD UP?

AI has proven to be immensely helpful for a number of practical applications, including:

It’s not just a tool for creators, though. AI programs like Open AI’s ChatGPT can offer financial advice, market analysis and more.

A number of financial management and budgeting apps are also being developed with integrated AI systems to improve users’ experience and provide more detailed insights into their finances.

For example, RBC recently launched its NOMI Insights AI program to help customers. According to the bank, NOMI Insights aims to provide customers with alerts, reminders and financial insights. BMO has been using AI in some of its investment tools to help provide advice to some of their customers.

Integrating AI into finance apps can create a better user experience by offering personalized insights, tips and alerts that customers would traditionally need to ask their accountants for.

DRAWBACKS AND LIMITS OF USING AI FOR PERSONAL FINANCES

While programs like NOMI show a lot of potential and promise, AI technology has some inherent risks that still haven’t been completely worked out. Here are some risks of relying on AI to help you manage your finances.

1. Limited financial education

Open AI’s ChatGPT was originally trained using a broad depth of human knowledge up until the year 2021. Recently, GPT-4 and Bing Chat were given internet access, allowing them to access all of the latest news and data.

Despite this, both GPT-4 and Bing Chat are still prone to errors, even when asked simple questions. For example, a lawyer recently used ChatGPT to help him write a legal case, and the AI referenced completely fake court cases that it made up to fulfil the task.

The AIs being used to develop systems like RBC’s NOMI Insights AI typically don’t have access to the internet. Instead, they’re blank AI models trained on specific information fed to them by their creators.

If the creators weren’t thorough with their education and don’t continue to feed the AI new information, though, the AI could begin generating wrong suggestions or inaccurate data.

2. Privacy concerns

Before you open Bing Chat and ask it to help you with personal problems, remember that every question you ask is being recorded. This also goes for Open AI’s ChatGPT. By signing up to use their AI services, all customers must sign a waiver for data collection, as it’s used to train the AI further.

AI programs developed by private companies may also have similar terms. The more questions you ask the AI, the more information the companies will learn about you.

3. Lack of emotion and human judgment

AI is far from developing and expressing real human emotion, so it cannot always provide human judgment. The advice you’ll get from personal finance AI won’t always take your personal emotions into account, which means the advice it gives simply may not fit.

4. Algorithmic bias

AI models are programmed on a specific data set fed to them by their developers. This means that AI is limited by what it knows. Some creators may knowingly (or unknowingly) create biases within the AI, preventing it from providing balanced financial advice.

5. Regulatory compliance

Financial regulatory authorities frequently modify laws and regulations regarding financial products, investments and more. If the AI isn’t fed the updated information or processes it incorrectly, then the AI could inadvertently cause you to break the rules.

SHOULD YOU USE AI TOOLS FOR YOUR PERSONAL FINANCES?

I believe that AI tools can greatly improve user experience on personal finance apps and may be able to offer some great insights and tips. However, I wouldn’t rely on them completely.

Remember, AI often makes mistakes, so you should always double-check the data for yourself to ensure accuracy. Regarding financial advice offered by AI, I recommend that you take it with a grain of salt.

While AI has many invaluable benefits, it’s far from replacing a human financial advisor and should be viewed as one of the many tools you can use to help manage your finances.

Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers on his Wealth Awesome website.