How AI is already changing the way you manage your money — for better or worse

Your bank just texted you about a suspicious transaction. An AI system caught potential fraud in seconds — but should you trust that same technology for managing money or your retirement savings?

Managing retirement finances is already challenging enough — fixed budgets, rising healthcare costs and investment decisions — and we’re now facing this question as artificial intelligence transforms how we handle money.

More than a quarter of all Americans are already making active use of AI-powered tools and robo-advisors, according to a Charles Schwab survey, even if many don’t realize how much AI is already part of their financial lives. Those fraud alerts, investment recommendations in your banking app and budgeting insights? They’re likely AI-powered.

The issue isn’t whether AI will affect your finances, but rather how to use it wisely. Let’s cover how AI is changing money management today and what you need to know about its benefits and potential pitfalls.

At-a-glance: Benefits and drawbacks of AI-driven finance

AI’s greatest strength lies in its ability to process vast amounts of data instantly and identify patterns that would take humans hours or days to spot. That’s why 90% of banks now use AI for fraud detection, as just one example. But this technology isn’t perfect.

Understanding these tradeoffs is crucial as AI becomes more integrated into everyday financial tasks. Let’s look at how this technology is already changing 5 key areas of money management, starting with budgeting.

🔍 Learn more: How to find a trusted retirement advisor: Costs, benefits and what to consider

1. Budgeting and money management

AI is transforming how we track and manage everyday finances. Modern systems go beyond basic expense tracking to offer predictive insights and automated optimization.

🚀 What’s happening now

AI-powered budgeting apps can automatically categorize expenses, predict upcoming bills and send real-time alerts when you’re approaching spending limits. These AI tools analyze your spending patterns to forecast future expenses, suggest adjustments to meet your goals, identify forgotten subscriptions and automatically transfer money to bank accounts when you’re under budget.

Wyatt Mayham, CEO & cofounder at Northwest AI Consulting, says AI excels at “tracking spending” and “analyzing fees” — routine tasks that help optimize your day-to-day money management. He notes that Empower Personal Dashboard and Monarch Money are two that he sees used often by older folks. While Cleo also tends to be popular for AI budgeting overall, he notes it’s “not so much among this older age range,” though it’s still worth considering “from a popularity standpoint for AI and budgeting.”

⚠️ What to watch for

While convenient, automated budgeting can create a false sense of financial security if AI gets it wrong. Additionally, these systems encourage you to link multiple accounts, creating a comprehensive financial profile that could be vulnerable to data breaches.

🔍 Learn more: Best budgeting apps for 2025: $0 and low-cost ways to track and monitor your money

2. Personalized investments

The investment world has seen perhaps the most dramatic AI transformation through robo-advisors. In the U.S., assets under management in the robo-advisory segment are projected to reach $1.67 trillion in 2025, growing to $1.91 trillion by 2029 at a 3.5% annual growth rate, according to numbers compiled by Statista.

🚀 What’s happening now

Robo-advisors like Betterment and Wealthfront use AI to create diversified portfolios tailored to your risk tolerance and goals. These platforms can automatically rebalance your portfolio as market conditions change with fees ranging from 0.25% to 0.50% of your account balance — significantly less than traditional financial advisors who typically charge 1% or more.

“Betterment and Wealthfront are probably more known for younger investors, but these are actually valuable for retirees managing a portion of their portfolio,” says Mayham. “Betterment, for example, automates income streams from investments, essentially acting like a self-made pension.” He emphasizes that AI’s strengths lie in specific areas — for example, “Running simulations, analyzing fees, tracking spending and managing a simple slice of your portfolio at low cost.”

⚠️ What to watch for

While robo-advisors excel at basic portfolio management, they may struggle with complex financial situations, especially those common among retirees. Mayham emphasizes that “the best approach is some kind of hybrid strategy,” using AI for simple portfolio management while relying on human advisors for “complex family situations, estate planning and market crashes — places where empathy and judgment matter.”

If you have multiple income sources, complex estate planning needs or complex tax issues, you should consider consulting with a trusted financial expert who can provide the personalized guidance that AI cannot yet replicate.

🔍 Learn more: 9 best investing platforms for 2025: Low-cost options to put your money to work

3. Security and fraud protection

AI has become a double-edged sword in financial security. More than 50% of fraud now involves artificial intelligence, according to Feedzai research, with criminals creating hyper-realistic deepfakes and sophisticated scams. But financial institutions are fighting back using the very same tools.

🚀 What’s happening now

AI systems monitor your account activity in real-time, learning your typical spending habits and locations to instantly flag or block unusual transactions — like large purchases in foreign countries or ATM withdrawals at odd times.

“Banks already use AI to flag fraud based on spending patterns, and it works well,” says Mayham. American Express reported a 6% improvement in catching fraudulent transactions, reports IBM, while PayPal enhanced their real-time detection capabilities by 10% using AI monitoring systems.

⚠️ What to watch for

As Mayham warns, “AI cuts both ways. Generative AI now powers scams like voice cloning for the ‘grandparent scam.’ ” Deloitte predicts that gen AI could enable fraud losses to reach $40 billion in the U.S. by 2027.

His advice for protection: “Create a family safe word, and never act on an urgent request without hanging up and calling back on a verified number. Treat any request for gift cards, crypto or wire transfers as an immediate red flag.”

🔍 Learn more: Top 15 financial scams — and what you can do to keep your money safe

4. Banking and payments

AI is reshaping how we interact with our banks and make payments. The banking industry leads all sectors in AI adoption, with 60% of banks already using generative AI and 87% planning to invest in AI technology in the next year, according to a recent white paper from the SAS Institute.

🚀 What’s happening now

When you chat with your bank online or call customer service, you’re likely interacting with AI-powered systems that can handle routine questions, transfer funds and help with account issues. Behind the scenes, AI is also helping banks make quicker decisions on loan applications. You might also notice more personalized offers or suggestions appearing in your banking app or statements.

⚠️ What to watch for

Your personal financial data is being fed into AI systems, and even bank executives admit that privacy and data security are their biggest worries about this technology. When AI makes decisions about your accounts or recommends financial products, it often can’t explain why. More concerning is that AI might steer you toward products that make the bank more money rather than what’s best for you.

🔍 Learn more: 5 practical ways to keep your financial information and identity safe online

5. Retirement and long-term planning

For those approaching or in retirement, AI offers sophisticated tools for long-term financial planning that were once only available to wealthy clients with expensive advisors.

🚀 What’s happening now

“There are several AI financial tools that provide exceptional value for people approaching or in retirement,” says Mayham. “Boldin is probably the most comprehensive platform for retirees — it runs Monte Carlo simulations, optimizes Social Security claiming, models Required Minimum Distributions and stress-tests ‘what-if’ scenarios like downsizing or long-term-care events.”

He also highlights account aggregation tools: “Empower Personal Dashboard, formerly Personal Capital, excels at helping retirees who often juggle multiple income streams. It provides a real-time net worth and cash flow picture and includes a fee analyzer to uncover hidden costs.”

Mayham notes that AI is particularly valuable for healthcare planning: “Traditional calculators use flat assumptions, which don’t reflect reality. AI models incorporate your health history, location, longevity and care preferences (in-home vs. facility) to forecast more accurately. This helps retirees decide how much to allocate for health care and whether long-term-care insurance makes sense.”

⚠️ What to watch for

Since retirement planning involves deeply personal decisions about your lifestyle, family and legacy, the current limitations of AI mean you still need human expertise for your most important financial decisions.

🔍 Learn more: 5 red flags to watch out for before choosing a financial advisor

🦉 Using AI wisely: Key dos and don’ts

As AI becomes more prevalent in financial services, knowing how to use these tools safely and effectively is crucial. Here are some practical guidelines.

✅ DO

• Use AI for basic budgeting and expense tracking — it excels at categorizing transactions and identifying spending patterns

• Try robo-advisors for straightforward portfolio management if you have simple investment goals

• Ask AI chatbots general financial questions to get started on research, but verify the information – AI can and does make mistakes

❌ DON’T

• Use AI for advice about specific stocks, cryptocurrency or high-risk investments

• Rely solely on AI for major investment decisions without consulting a human advisor

• Trust AI advice for complex situations involving estate planning or tax strategies

• Share sensitive personal information with AI chatbots

Bottom line: AI works best as a starting point for financial information and basic automation, but expert human financial advice remains essential for major financial decisions and complex situations.

Other stories in our money and investments series

• Dollar-cost averaging: How to stop worrying about the market and enjoy automatic investing

• How I started investing with just $100 — and why you shouldn’t wait

• 5 common investing myths: Why you don’t need thousands to own stocks

• 7 pieces of useless investing advice — from the experts

• How healthy are your finances, really? 4 money questions to ask yourself today

FAQs: Managing your wealth and protecting your money

Learn more about using artificial intelligence to manage your finances with these common questions. And take a look at our growing library of personal finance guides that can help you save money, earn money and grow your wealth.

How will AI change wealth management?

AI is making wealth management cheaper and more accessible. While traditional advisors may charge 1% or more annually, AI-powered robo-advisors charge from $0 to 0.25%, offering significant savings. Learn more in our guide to common investment fees (and tips for avoiding them).

Can AI help manage my money?

Yes, AI can help manage your money, particularly for routine tasks like budgeting and basic investing. However, complex financial situations like estate planning, tax strategies or coordinating multiple income sources still need human expertise.

How will AI change money?

AI is making financial services smarter through better banking apps, automated investing and fraud protection. It will make services more personalized and efficient. But money itself won’t change – AI just makes existing tools work better.

Will AI replace money managers?

Not completely. While AI can handle basic portfolio management that entry-level advisors used to do, complex situations still need human judgment and emotional intelligence. AI makes advisors more efficient, rather than replacing them entirely.

Sources

• 2024 Modern Wealth Survey, Charles Schwab. Accessed July 17, 2025.

• 2025 AI Trends in Fraud and Financial Crime Prevention [PDF], Feedzai. Accessed July 17, 2025.

• Robo-Advisors – United States, Statista. Accessed July 17, 2025.

• AI fraud detection in banking, IBM. Accessed July 17, 2025.

About the writer

Kat Aoki is a finance writer who’s written thousands of articles to empower people to better understand technology, fintech, banking, lending and investments. Her expertise has been featured on sites like Lifewire and Finder, with bylines at top technology brands in the U.S. and Australia. Kat strives to help consumers and business owners make informed decisions and choose the right financial products for their needs.

Article edited by Kelly Suzan Waggoner

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