Is It Safe to Use AI for My Finances?

Dear Friend in Finance,
I've been seeing a lot of buzz about using AI tools to help with budgeting, investing, even taxes. Is this something I should be using? Is it safe, or am I going to end up with a robot managing my money all wrong?
Sincerely,
Skeptical but Curious

Dear Skeptical but Curious,

You're right to be skeptical. AI has exploded into the public conversation, and financial companies are rushing to build it into their apps, tools, and marketing. But that doesn’t mean it’s safe to trust.

In fact, I would caution you against relying on AI for anything that involves synthesis, judgment, or even basic fact-checking. Let’s walk through why.

AI Doesn't Actually Know Anything
Most of the AI tools people are using today don’t work by retrieving facts. They work by predicting what words are likely to come next. That might sound simple, but it leads to a serious problem: these tools can make up answers that are completely wrong while sounding totally confident.

This is called hallucination. It means the tool gives you an answer that was never in its training data, never true to begin with, and never checked. If you ask how retirement contributions are taxed or whether you're eligible for the Earned Income Tax Credit, you might get an answer that sounds correct but is flat-out false. That’s not just a glitch. It’s baked into how these systems work.

Financial Mistakes Carry Real Consequences
If an AI tool tells you to put money in a certain kind of account, or claims you’ll get a certain deduction, and that information is wrong, you’re the one who has to deal with the fallout. That might mean losing money, missing a deadline, or even facing penalties or back taxes.

This risk goes up for people with any kind of complexity in their finances, like:

• Gig workers or freelancers
• Multiple income streams
• Healthcare subsidies or tax credits
• Student loans
• Rental income
• Blended families or shared custody
• Retirement accounts with contribution limits

AI tools do not understand context. They don’t understand edge cases. And they definitely don’t understand you.

Some Tools Might Be Okay in a Very Limited Way
Budgeting apps that use AI to categorize your spending or send reminders can be helpful, as long as you’re still the one reviewing the results. But the moment the tool tries to suggest a financial decision or explain a rule, that’s where you should stop trusting it.

The Right Mental Model
If you want a rule of thumb, this is it: use AI like a calculator, not like a financial advisor. It can be useful when you already know what you're doing and just want help getting there faster. But if you're leaning on it to teach you, guide you, or warn you when you're headed the wrong way, it will not do that. And it will not tell you when it's wrong.

The Bottom Line
AI is not safe to use for financial advice, even when it looks helpful. It is not reliable for fact-finding. And it is especially dangerous when the stakes are high and the rules are nuanced. If you're trying to make sense of your money, you need advice from someone who understands how your life fits into the financial system. You need judgment, accountability, and context. AI does not offer any of those.

Sincerely,
Your Friend in Finance