You’ve probably done this already.
Late at night, looking at your bank balance, you open ChatGate, Cloud, or Gemini and type something like, “How should I save for retirement?” And in about three seconds, you got a brilliant, confident answer that sounded like it came from a financial planner charging $300 an hour.
The problem is: That answer might be dead wrong.
An Intuit Credit Karma survey found that two-thirds of Americans who have used generative AI have asked for financial advice from it. Among Gen Z and Millennials, that number reaches 82%. And 85% of them actually followed the advice they received.
But according to a Fortune analysis of the same data, more than half of respondents who followed AI money advice made a poor financial decision because of it.
So millions of people are using a tool that is helpful about half the time and harmful half the time. This is not a financial strategy. That’s the coin toss.
Or maybe they’re not doing it properly.
I use AI all the time, including finding investment ideas.
Example: Last November, I wrote an article called “Anatomy of an AI Trade: How I Use AI to Make Money in Stocks.” In that article I wrote about using AI to help find exchange-traded funds (ETFs) that offer exposure to small- and mid-cap biotech stocks. It recommended the ALPS Medical Breakthroughs ETF. After doing a little more research, I purchased some.
As I write this, the ETF is up more than 23%.
I believe that AI can help investors, provided they are using it correctly. And anyone can learn how: it just takes practice.
Here are nine tips that will help you harness the power of AI to manage your finances.
1. Stop asking vague questions
This is the biggest mistake people make, and this is where the MIT professor’s research gets really interesting.
Andrew Lo, director of MIT’s Financial Engineering Laboratory, told CNBC that most people lazily type something like “How should I retire?” And expect useful output. It’s like going into a doctor’s office and saying, “Fix me” without describing your symptoms.
Lo’s blunt assessment? “garbage in garbage out.”
The quality of your answer depends almost entirely on the quality of your question. And most people’s questions are terrible.
2. Use the fiduciary hack
Here’s Lo’s solution, and it’s brilliant.
Instead of asking vague questions, ask the AI to perform a specific role. Lo’s example prompt goes something like this: “Let’s say you’re a fee-only fiduciary financial advisor. Here are my goals, obstacles, tax bracket, state, assets, risk tolerance, and timeline.”
Then ask about the base-case strategy, key assumptions, risks, what could invalidate the plan, and – this is the important part – what information is missing or uncertain in the AI.
By forcing the chatbot to act as fiduciary, you are essentially asking it to prioritize your interests and flag its own blind spots. This doesn’t make the AI legally liable, but it does dramatically change the quality of what comes out.
3. Know where AI is really useful
In my experience, AI chatbots are good at explaining financial concepts in simple English. Things like how a Roth IRA conversion works, why diversification matters, or the difference between tax credits and deductions.
They’re also great for creating scripts to negotiate your bills, analyze your spending if you paste bank statements, or compare the features of two financial products side by side.
Think of it this way: AI is a fantastic research assistant. This is poor decision making.
4. Never trust it with your taxes
This can really cost you money – real money, plus Internal Revenue Service (IRS) penalties.
According to one, about 26% of Americans used AI to help file their 2025 tax returns, more than double the number from last year. adobe pole. Some users reported getting large refunds. Others got bad advice.
Here’s the thing most people don’t know: The IRS doesn’t care that a chatbot called you to claim a deduction. If the AI is wrong, it’s your fault. There is no “robots ate my homework” defense.
Tax law is constantly changing. The latest changes under the new tax bill may not be reflected in AI responses yet. As a CPA, I can tell you that taxes are the last place to trust unverified AI output, at least for now.
However, I have no doubt that the day will soon come when AI will be able to pay your taxes. If I were working in the tax preparation business, I would be thinking about my next career path.
5. Understand the 35% problem
A study by broker analysis site Investing in the Web asked ChatGPT 100 finance questions and reviewed their answers by industry experts. outcome? according to Entrepreneur’s reporting35% of the answers were incorrect or misleading.
This is clearly not 35% wrong. This is a sneaky type – answers that sound official and sophisticated but leave out important details or cite outdated information.
As a Purdue University accounting professor told CNBC, AI will confidently convince you that the sky is green. The mechanics of the answer seem perfect, but the conclusion is absolutely wrong.
Important to note: That story about the 35% error rate was published a year ago, which is like a century in AI time. However, keep in mind that the confidence expressed by AI may be wrong. Verify everything.
6. Ask him what he doesn’t know
This is the most underrated trick in AI prompting, and it comes straight from Lo’s playbook.
After you have your answer, read on: “What information are you unsure about? What data is missing? What could make this advice wrong?”
A good financial advisor tells you the risks. A great one tells you what they don’t know. Most humans wouldn’t volunteer that information, but AI will actually do it – if you ask.
This step separates those who gain value from AI financial instruments and those who get burned.
7. Don’t hand over your financial life
According to an Intuit Credit Karma survey, three-quarters of people who use AI for financial advice say it lets them ask questions they would be embarrassed to ask anyone else. This is actually a benefit – no judgment, no sales pitch, available at 2am
But the flip side is that people are sharing incredibly sensitive data with chatbots, like income, debt, Social Security numbers, and completed tax documents.
Ask yourself: Do you know where that data goes? Who gives training on this? Is it archived or deleted?
Use AI for common questions and concept clarifications. When it comes to sharing your full financial picture, keep in mind that all that information is potentially being absorbed by the company behind the AI.
8. Use the reverse-prompt shortcut
Here’s another gem from Lo that almost no one knows about.
After going back and forth with the AI through 10 or 20 prompts and finally getting a really solid answer, ask another question: “What prompt should I have asked you first to get this answer?”
The AI will give a customized prompt that you can save and reuse next time. It’s like getting a custom key made for a lock you’ve already painstakingly selected.
Over time, you build up a small library of signals that skips the garbage and goes straight to the good stuff. The people who are deriving real value from AI are doing just that.
9. See what’s going to happen next
Big tech companies aren’t the only ones dabbling in financial AI. They are all going in.
According to TechCrunch, OpenAI recently acquired a personal finance startup called Hero Finance – the company’s second fintech acquisition in six months. Hiro’s vision was an “AI personal CFO” that could manage household budgets, optimize tax strategies and execute financial plans.
As American Banker reported, one fintech analyst called the move an aggressive push into financial services aimed at gaining “share of mind” in the way consumers think about money.
As I mentioned above, the tools are going to get better dramatically faster. But “better” doesn’t mean “perfect”, and it certainly doesn’t mean “accountable”. AI can’t be sued for bad advice. This cannot be penalized by the SEC. Don’t lose sleep over it if it drains your savings. So use it, but do it carefully.
bottom line
AI is the most powerful free financial tool ever created. It is also the most dangerous because it makes one sound like an expert even when it is wrong.
Use it to learn. Use it for research. Use it to draft, compare, and brainstorm.
But when does it come time to make real decisions with real money? Verify everything. Cross-check the numbers. And for complex situations involving taxes, estate, or retirement income, get a qualified human advisor who has a legal obligation to put your interests first.
AI has no fiduciary duties. It has no skin in the game. And it certainly won’t cover your losses if something goes wrong.
You will do.