How Reliable Are AI Financial Advice Tools?
More Canadians are turning to artificial intelligence for financial advice. A 2024 report from the Bank of Montreal found that about one-third of Canadians use AI tools for tasks like setting budgets and improving financial literacy. But how solid is the advice these tools provide? We tested ChatGPT with common personal finance questions and compared its answers to those of human experts.
Should I Buy or Rent a Home in Canada?
ChatGPT: The choice depends on your finances, lifestyle, and long-term plans. Buying makes sense if you have financial stability, enough saved for a down payment and closing costs, and plan to stay put for at least five years. Renting suits those who want flexibility, prefer to avoid maintenance, or face high upfront costs. In pricey markets like Toronto or Vancouver, renting can sometimes be financially smarter in the short term.
Expert Insights: Buying a home impacts your ability to save for other goals like education and retirement. Owning a home ties up cash and comes with ongoing repair costs, which aren’t fully captured in the AI’s answer. Also, five years might not be long enough to justify buying.
Verdict: ChatGPT covered the basics well but missed key details on costs and cash flow. Score: 6/10
What’s the Best Way to Pay Off Credit Card Debt?
ChatGPT: List your balances and interest rates. Use the avalanche method (pay highest interest first) or the snowball method (pay smallest balance first for quick wins). Always pay more than the minimum to reduce interest.
Expert Insights: The avalanche method is financially optimal, but completely avoiding new credit purchases isn’t realistic for most people.
Verdict: Good explanation of methods and importance of paying more than minimum, but lacks nuance about which method suits different personalities. Score: 7/10
How Do I Protect My Money from Inflation?
ChatGPT: Investing is the best way to protect against inflation since cash loses value over time.
Expert Insights: Investing helps, but it’s not as simple as it sounds. Some savings need to stay liquid and safe for emergencies.
Verdict: Correct but too simplistic. Score: 6.5/10
How Do I Start Investing?
ChatGPT: Open a Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) through online brokerages or robo-advisers.
Expert Insights: That’s a good start, but banks and mutual funds are also valid, less intimidating options for beginners.
Verdict: Solid advice but misses alternative routes and details like contribution limits. Score: 7/10
How Can I Save Money on My Next Vacation?
ChatGPT: Plan ahead. Use travel rewards points on flights and hotels to reduce costs.
Expert Insights: Also consider timing for weather, prices, tour guides, and dining quality.
Verdict: Covered most key points including rewards, off-season booking, budgeting, and insurance. Score: 8.5/10
Should I Prioritize Investing in My TFSA or My RRSP?
ChatGPT: It depends on your income and goals.
Expert Insights: The real factor is comparing your current tax rate to your expected future rate. The decision isn’t as simple as income level alone.
Verdict: Oversimplified. Score: 5.5/10
How Do I Save for My Child’s Education?
ChatGPT: Use a Registered Education Savings Plan (RESP). It grows tax-free and earns government grants up to $500 per year via the Canada Education Savings Grant.
Expert Insights: Clear answer, but misses details on how to maximize the grant and catch up on missed contributions.
Verdict: Good basic info, could be more thorough. Score: 7.5/10
AI financial advice tools like ChatGPT offer solid starting points but often miss important nuances and practical considerations. For professionals in finance, combining AI-generated insights with expert judgment remains essential.
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