Don’t Take Financial Advice from AI
Money For the Rest of Us
J. David Stein
4.5 • 1.4K Ratings
🗓️ 22 October 2025
⏱️ 31 minutes
🧾️ Download transcript
Summary
How AI gets simple finance wrong, and how to make it work for you, not mislead you
Topics covered include:
- How AI ignores the time value of money
- A detailed example of ChatGPT misleading by making a simple math mistake
- Some examples of opportunity costs and sunk costs when making financial decisions
- Understanding how AI works can help us use it more effectively
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Show Notes
What Kind of a “PhD-level Expert” Is ChatGPT 5.0? I Tested It. by Gary Smith—Mind Matters
Top US Army General Says He’s Letting ChatGPT Make Military Decisions by Joe Wilkins—Futurism
Why Language Models Hallucinate by Adam Tauman Kalai, Ofir Nachum, et al—Arxiv
Auto Loan Calculator—nerdwallet
Related Episodes
538: Forests, Fakes, and the Fight for the Real
457: AI’s Fork in the Road: Societal Bliss or Existential Threat
450: How Higher Interest Rates Alter Our Financial Blueprint
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Transcript
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| 0:00.0 | Welcome to Money for the rest of us. This is a personal finance show on money, how it works, |
| 0:06.0 | how to invest it, and how to live without worrying about it. I'm your host, David Stein. |
| 0:11.4 | Today is episode 542. It's titled, Don't Take Financial Advice from AI. Here's a question in personal finance. An individual needs to borrow $24,000 to buy a car. |
| 0:27.3 | Should they get a one-year loan at 10% or a 20-year loan at 1%? This was a question that AI skeptic, |
| 0:37.4 | Gary Smith, who runs the website Mind Matters, |
| 0:40.8 | asked ChatGPT5 in order to illustrate that the model fell short of OpenAI CEO Sam Altman's |
| 0:49.2 | claim that ChatGPT5 quote really feels like talking to an expert in any topic, like a PhD expert. |
| 0:58.4 | I asked Chat GPT-5 the same question. |
| 1:02.1 | It went through the math, showed its work, and concluded that the one-year loan was the better option |
| 1:09.2 | because the total interest paid was less than the |
| 1:12.9 | 20-year loan. In fact, Chat said that the one-year loan was far better financially. Gary Smith |
| 1:21.8 | concluded that Chat GPD-5 erred because it didn't take into account the time value of money. |
| 1:31.2 | He wrote, a dollar paid this year is more financially burdensome than a dollar paid five, |
| 1:37.2 | 10, or 30 years from now, with the size of the difference depending on the rate of return |
| 1:41.3 | that the borrower can earn by deferring loan payments. |
| 1:46.1 | Another way to describe the time value of money is a dollar received or saved today |
| 1:51.9 | is worth more than a dollar received or saved 10 years from now. |
| 1:55.7 | That's because the dollar could be invested to earn a rate of return. |
| 2:00.7 | Gary Smith continued, |
| 2:01.9 | ordinary people living in the real world know that a 20-year loan at 1% is nigh irresistible |
| 2:09.9 | and certainly more attractive than borrowing for one year at 10%. |
| 2:15.1 | I don't know. |
... |
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