What AI Can and Can't Do With Financial Questions
AI accurately explains German financial terms (Freistellungsauftrag, Steuerklassen) and compares options (ETF vs Riester), but responds incorrectly to 35% of financial queries and cannot predict markets or create personalized plans [1]. Reliability drops as task complexity increases: simple explanations are accurate, multi-step analysis contains errors, predictions are useless.
Understanding this gap helps you ask better questions and know when to stop relying on AI.
What AI Handles Well
Explaining Concepts
AI excels at definition and explanation:
- "What is a Freistellungsauftrag (tax exemption order) and why does it matter?"
- "How does the German progressive tax system work?"
- "What's the difference between accumulating and distributing ETFs for tax purposes?"
These are knowledge questions. The answers exist. AI can retrieve and explain them clearly, often better than a quick search because it can tailor the explanation to your level.
Translating and Interpreting Documents
Got a letter from the Finanzamt (tax office)? A contract in German? AI can:
- Translate the text
- Explain what it means in context
- Highlight what actions you might need to take
This is one of AI's strongest use cases for people new to Germany. The combination of translation and explanation in one step is genuinely valuable.
Comparing Options
"ETF vs. Riester vs. betriebliche Altersvorsorge (company pension) — what are the tradeoffs?"
AI can lay out:
- How each option works
- Tax implications
- Flexibility differences
- Who each option suits
It won't tell you which to choose (and shouldn't), but it can help you understand the landscape.
Walking Through Scenarios
"What would happen if I left Germany after 3 years — what happens to my pension contributions?"
AI can trace through implications. These "what if" explorations help you think through decisions before making them.
Answering Questions You're Embarrassed to Ask
"Is it normal to have no savings at 30?" or "What's a realistic emergency fund?"
No judgment. No awkward moments. You can ask the same question multiple ways until it clicks.
Where AI Struggles
Multi-Step Financial Planning
"I earn €75,000, have €20,000 in savings, want to buy an apartment in 5 years, and might have kids — what do I do?"
This requires:
- Understanding your complete situation
- Weighing competing priorities
- Making judgment calls about risk
- Projecting into an uncertain future
AI will give you an answer. It won't be your answer. The complexity exceeds what the tool can reliably handle.
Anything Requiring Your Specific Context
AI doesn't know:
- Your actual risk tolerance (not what you say, what you'd actually do in a crash)
- Your job security
- Your relationship dynamics around money
- Your immigration status and plans
- Your health situation
- What keeps you up at night
It can only work with what you tell it — and you probably can't articulate everything that matters.
Predictions
"Will interest rates rise?" "Is now a good time to buy property?" "Which stocks will outperform?"
AI will answer these questions. The answers are worthless. Not because AI is bad, but because these questions don't have knowable answers.
If AI confidently predicts the market, that confidence is an artifact of how it generates text, not evidence of actual foresight.
Obscure or Highly Specific Questions
The more niche the topic, the higher the error rate:
- Small German financial institutions
- Very specific tax situations
- Recent regulatory changes
- Local programs or benefits
AI generates plausible-sounding text even when it doesn't "know" the answer.
The Hallucination Problem
When AI doesn't know something, it doesn't say "I don't know." It generates something plausible-sounding instead.
According to a 2025 study, AI responds incorrectly to about 35% of financial queries [1]. Roughly one in three wrong answers are pure hallucination (fabricated information not based on training data).
Hallucination risk is higher for:
- Less common German financial products
- Specific rules that changed recently
- Details about smaller institutions
- Your specific tax situation
Hallucination risk is lower for:
- General concepts (how progressive taxation works)
- Well-documented major products
- Explanations of widely-understood systems
Germany-Specific Limitations
Most AI training data is English-language and US-centric. This creates specific gaps:
| Topic | Potential Gap |
|---|---|
| Tax system | Steuerklassen (tax classes), Ehegattensplitting (spousal income splitting), Solidaritätszuschlag (solidarity surcharge) may be explained incompletely |
| Insurance | The public/private health insurance divide and its long-term implications are unusual globally |
| Employment law | German employee protections differ significantly from US/UK assumptions |
| Pension system | The three-pillar system (state, occupational, private) has specific rules that change frequently |
Always verify Germany-specific answers with official sources — Finanzamt, BaFin, your Krankenkasse (health insurer), or a professional.
A Practical Framework
Good Questions for AI
| Type | Example |
|---|---|
| Definition | "What is Kapitalertragsteuer (capital gains tax)?" |
| Explanation | "How does the German pension system work?" |
| Comparison | "What are the differences between Riester and ETF investing?" |
| Translation | "What does this letter from the Finanzamt mean?" |
| Scenario | "What happens to my ETF if I move to another EU country?" |
Questions to Take to a Professional
| Type | Example |
|---|---|
| Optimization | "How do I minimize my tax burden given my specific situation?" |
| Major decisions | "How do my partner and I structure our finances?" |
| Complex situations | "I have income from three countries — how do I file?" |
| Legal implications | "What are the risks of this contract?" |
| Predictions | "Will property prices in Munich keep rising?" |
The Verification Habit
Rule: If an AI answer would affect a decision involving more than €500 or a hard-to-reverse choice, verify it.
How to verify:
- Check official sources (Finanzamt, BaFin, relevant Behörde)
- Cross-reference with a second AI (if they disagree, dig deeper)
- Look for the primary source (actual law, actual regulation)
- Ask a professional for complex situations
The goal isn't to distrust AI entirely. It's to match the verification effort to the stakes.
What AI Can Do for Your Financial Learning
Despite the limitations, AI remains a powerful learning tool. Used correctly, it can:
- Accelerate your understanding of the German financial system
- Translate bureaucratic language into something comprehensible
- Help you prepare better questions for professionals
- Let you explore scenarios without commitment or judgment
- Fill gaps in your knowledge at any hour, in any language
The key is knowing what you're working with: a tutor with broad knowledge and occasional errors, not an oracle with perfect foresight.
Sources
[1] "Personal finance and AI: Should you trust ChatGPT's investment advice?" — Euronews, October 30, 2025. Study found AI chatbots respond incorrectly to 35% of financial queries. https://www.euronews.com/business/2025/10/30/personal-finance-and-ai-should-you-trust-chatgpts-investment-advice