4 Ways AI Money Tools Could Actually Hurt Your Finances
Written by
Josephine Nesbit
Edited by
Daria Uhlig
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Artificial intelligence technology is part of our everyday lives, including our finances. AI money-saving and budgeting tools can automate budgeting and money management, offer investment guidance and even help you find the best deals and rewards when shopping. But they also have some downsides.
Some of these tools come with monthly fees and hidden costs, and they can often lead to overspending. There’s also no personalization because of the lack of human interaction. This doesn’t mean you should outright avoid all AI tools, but you should be aware of their downsides and consider speaking with a professional financial advisor when needed.
Monthly Fees and Hidden Costs
“Many free apps are still making money, but the cost to us is hidden,” James DeLapa, director of digital marketing at Wrike, wrote in an email to U.S. News & World Report. This could be through data collection, difficult-to-cancel subscriptions and costs to unlock all of the app’s features and other in-app purchases.
While all apps collect some type of data from their users, some also sell it to marketers who use it to target you in other ways. There are also automatically recurring app subscriptions that are difficult to cancel and even capitalize on people forgetting. A 2022 survey from C+R Research found that 42% of consumers have forgotten they were paying for a service they no longer use.
Some apps also claim to be free, but as soon as you sign up, you realize you need to pay in order to take advantage of all the features. “These types of free services tend to be even more insidious because it’s easy to start seeing the convenience of an upgraded version as a necessity once you’re using the app or service regularly, and the low monthly cost can be enough to lure many people in,” Carter Seuthe, CEO of Credit Summit, wrote to U.S. News in an email.
Overspending
Apps like ShopKick, RetailMeNot, Ibotta and Fetch can help you find the best deals when shopping. While this can definitely help you save money, it can sometimes lead to overspending and derail your finances.
Spending money to save money, also called “spaving,” isn’t necessarily bad. For instance, if there’s a buy two, get the third item free deal, this would only make sense if you need the item. The problem is when it leads consumers to buy something they didn’t want or need and may never use.
In a YouTube video on her Rachel Cruze channel, money expert Rachel Cruze explained how spending money is actually a marketing gimmick used online and in person. It could push you to add more items to your cart for free shipping, or spend more money because there’s a sale.
“When you need something, find the money in your budget to buy it. And when you don’t [find the money], find the power to say no,” Cruze said.
Lack of Human Interaction
Not all AI money apps offer you the ability to speak with a professional. You may not need access to a financial advisor when navigating a shopping or budgeting app, but investing apps are a different story.
Some apps have a human advisor option, but others solely use AI bots, or “robo-advisors,” to answer queries. But is this a good option for all investors?
According to CNBC, robo-advisors may be better suited for newer investors who haven’t built much wealth and would like low-cost money management help. Acorns, Fidelity Go, Betterment and Ellevest are all AI money tools that offer robo services that let clients sign up without having to meet any financial qualifications.
However, robo-advisors might not ask the right questions or gather enough information to assess the investor’s needs and risk tolerance. Robo services are also limited in what they offer.
Little Personalization
Generative AI tools, such as ChatGPT, can take and answer questions and generate predictions of potential outcomes. They can also help answer your personal finance questions, but you shouldn’t rely on them.
According to an Explainomics video by MarketWatch, if you give ChatGPT the details of your mortgage and ask, “Should I prepay my home loan?” it generates generic responses. But that’s the problem.
“Good advice needs to consider your overall financial situation — your goals, your lifestyle, your career, your family and many other factors,” the video explained. “Right now, chatbots tend to generate fairly generic answers that are solid and sensible but aren’t tailored to your specific financial situation.”
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