Artificial intelligence (AI) is becoming increasingly present in our daily lives, including when it comes to personal finances. However, like any tool, it has its limitations and involves significant risks that you should be aware of. Here are some guidelines to help you use AI responsibly when it comes to money.

How can AI help you?

When used with a certain degree of caution, AI can help you quickly access information and deepen your understanding of personal finance. It can help you:

  • Become familiar with financial concepts, such as how a TFSA or an RRSP works.
  • Explore ways to better manage your budget, including learning about different methods for tracking your expenses.
  • Perform calculations or simulations, for example, to illustrate the effects of compound interest.
  • Summarize information or prepare questions before consulting a professional.

In general, AI can serve as a useful starting point for your research. However, its responses should not be used as the sole basis for making a financial decision.

What are the limitations of AI?

Even when a response seems clear or convincing, it’s important to keep in mind that AI can make mistakes. Unlike a living, breathing person, AI doesn’t truly understand the information it processes. It generates outputs based on the data on which it was trained and the prompts it receives. If that information is incomplete, inaccurate or outdated, its results may be as well.

Artificial intelligence isn’t familiar with your personal circumstances, financial goals or risk tolerance. Its outputs should therefore be used with caution.

In particular, AI cannot:

  • Guarantee all the content it generates is in fact accurate
  • Take into account your personal and financial situation as a whole
  • Replace the expertise of a professional
  • Determine with certainty which investments will generate the highest returns
  • Accurately predict how financial markets will perform
  • Eliminate the risks associated with investing

What precautions should you take?

AI-generated content can be helpful, but it should be used to support your thought process rather than direct your financial decisions. Take the time to check AI responses and consider whether they truly apply to your situation and goals.

When using AI in a financial context:

  • Check important information with reliable sources or qualified professionals
  • Consider your ability to assume risk
  • Keep in mind that AI doesn’t know the full extent of your entire personal and financial situation
  • Remember that the final decision is yours, and AI shouldn’t replace your judgment

Finally, avoid sharing sensitive information with AI tools, such as account numbers, passwords or financial statements. As a general rule, before sharing personal information, ask yourself whether you would be comfortable with other people seeing it.

Beware of AI scams

AI can make certain types of fraud more difficult to detect, particularly when it’s used to create deepfakes or promote fraudulent investment opportunities.

Keep in mind that if an offer seems too good to be true, it probably is.

Key takeaways

  • AI can be a useful tool for gaining a better understanding of certain aspects of your personal finances and exploring different options. Use it to gather information and help you think through your choices.
  • Like any tool, AI has its limitations. AI-generated content may be inaccurate, incomplete or not suited to your particular situation.
  • Before making a financial decision, always take the time to check AI-generated results with reliable sources, and consult a professional if needed.