Should I use AI to help manage my money?

The rise of AI tools has made waves in recent years, with tools released at a breathtaking rate, many of which are available for anyone to experiment with. Whether you’ve used any AI tools or not, you may wonder if you can use them to help manage your money. While AI isn’t perfect, and you should always approach its suggestions with healthy skepticism, there are many ways to manage your money with AI.

What does managing your money with AI look like?

Artificial intelligence, or AI, has become a buzzword, leading to confusion on what it is in practical terms. While AI can take many forms and be used in countless ways, most modern attention on AI focuses on AI chatbots, including OpenAI’s ChatGPT, Google’s Bard and others. Unlike “dumb” chatbots, these AI chatbots utilize large-language models (LLMs) to produce seemingly realistic interactions between you and the bot. You can ask questions and converse, much like with an actual human. Some AI platforms will even generate images!

The intersection between AI and money management comes into play by giving AI prompts related to your financial situation and how to handle it. While AI can be a valuable tool in this way, it’s not foolproof, so it’s important to know current AI technology’s strengths, weaknesses and strategies to get the most out of AI.

Ways to help manage your money with AI

Make a budget

Creating a budget is easier than ever with AI tools. When asking AI to create a budget for you, provide as much context as possible. This includes your income, typical fixed expenses and essential life circumstances that dictate how you spend.

For example, asking AI, “Can you create a budget for me on a 60k salary?” is a good start, but you can get better results by being more specific. Following that question up with “I’m single and live alone, paying $1,400 in rent. I drive a paid-off car that doesn’t have high repair costs” will help the AI craft a budget best suited to your unique situation.

Analyze your spending

While most AI tools can’t look directly at your bank and credit card statements for security reasons, you can manually calculate and list your expenses and give them to an AI tool. The AI can point out trends in your spending habits and potential areas of improvement.

This can also be paired with budget information previously provided to the AI. When the AI knows your budget, it has concrete numbers to work with and can make better recommendations for your personal situation.

Set financial goals

AI is fantastic at generating ideas, so getting AI to help you set financial goals can help put you on track for the future you want. As with other tasks, more specific prompts will generate better results. Instead of asking an AI tool for financial goals, ask for help generating short- and long-term financial goals.

Giving specific context to what you want to achieve will help as well. For example, if you want to retire by 60, you should tell the AI that, otherwise, it will likely assume you want to retire at the full retirement age.

Not only can AI generate new financial goals, but it can also enhance your current ones. Goal setting works best by breaking a bigger goal into smaller, easier-to-achieve parts. AI can help you through this process, giving you clear direction on tasks you can work towards immediately.

Finally, AI can assist in your financial goals by evaluating your progress. You will need to supply your specific financial information to the AI.

Tips to make the most of managing your money with AI

It’s all about the prompts

AI is only as good as the information you provide it. Knowing how to construct high-quality prompts will produce better results. This is so important that there are jobs dedicated to producing the best possible prompts for AI to work with. While you’ll want to do outside reading on this to get the best results, here are a few general practices you should follow:

• Get specific: AI can only provide output based on what you input, so giving a more precise and detailed input will result in better results.
• Give the AI a role: Asking an AI tool to step into the shoes of a specific role and answer from that perspective often results in better answers. For example, you could tell the AI to assume the role of a knowledgeable friend who wants to spread financial literacy and provide information to help people reach their financial goals.
• Experiment and learn: If you’ve never used AI tools before, it may take some experimenting before you get the hang of using them. Many AI tools are free and have generous or unlimited usage limits, so feel free to take all the time you need to figure out what prompts work best.

Don’t supply sensitive information

Typically, AI stores all conversations in plain text, so it’s smart practice to avoid sharing any private information with AI. This includes login information (which AI can’t use anyway) and anything you wouldn’t want others to see.

Follow up

One of the most powerful aspects of AI over a traditional search engine is the ability to follow up with the AI and engage in a true conversation. You don’t have to start over if your initial question doesn’t produce the desired results. Ask follow up questions with more detail or more information to the AI until you’re satisfied with the response. Much like conversing with a human, AI can build upon itself. There is no need to cram everything into one prompt and answer.

Take everything with a grain of salt

AI’s potential to help you manage your money is enormous, but it isn’t foolproof. AI produces responses based on the dataset it has been trained on, finding patterns and making predictions. This means that results may not always be 100% accurate or could include biases. Carefully consider everything an AI says and do further research if you’re skeptical about an AI response. You can also point out to the AI itself that you think something may be incorrect, and the AI will often notice the mistake upon double-checking its work.

Overall, AI is a great tool to help manage your money and set financial goals when used properly, but it also comes with limitations. Using AI’s strengths and best practices when interacting with AI tools, you can set yourself up for greater financial success through better budgets, smarter spending and clarity on your financial goals.

Learn more about finances and technology:

• How two-factor authentication increases your account security
• Spotting the FTC’s most reported crypto scams
• The advantages of using a digital wallet