Artificial intelligence (AI) has been a hot topic for some time now. It has gotten mixed reactions from the public, some saying it will replace jobs and others saying it will improve how we do things. It has both fascinated as well as filled many with fear for a while now.
But what exactly is AI?
Well, according to McKinsey&Company, Artificial intelligence (AI) is a machine’s ability to perform the cognitive functions that are usually associated with human beings. For instance, an AI-powered machine can perform data entry tasks faster and more accurately than humans or using chatbots and voice assistants to handle routine customer service questions. They are repetitive and require minimal decision-making. Therefore, these industries could lead to the termination of some employees.
However, AI has an advantageous impact on the labour market as well. In reality, AI is creating new jobs in industries like robotics, data analytics, and machine learning—all of which call for specialised knowledge and abilities. AI can also enhance human capabilities in industries like healthcare and education, creating new roles and employment prospects.
Wherever you stand, it is evident that AI has revolutionised how we do things in our various sectors. And personal finance has also not been left behind. How? Glad you asked.
Think of AI as a personal finance advisor you have in your pocket. AI-powered financial management tools allow people to easily track their spending habits. These tools analyse transaction data, classify expenses, and reveal insights regarding spending habits using machine learning algorithms.
This could help you set and achieve your financial goals like saving for the holidays or paying off debt. It can also predict future expenses by analysing your past spending habits. AI can recommend how much to save each month and propose modifying your spending habits so you can reach your goals faster. This degree of personalisation enables you to tailor your financial plans to your own needs and tastes, making it easier to stay on track and accomplish your goals.
Read Also: 12 Principles of Personal Finance
The growth and rise of technology came with the good and the bad. Security is a significant issue in personal finance and artificial intelligence has significantly improved fraud detection and prevention methods. Unfortunately even with technology evolving fraudsters won’t let those setbacks stop them. They are constantly searching for loopholes or new ways to defraud or scam you.
AI can protect you from financial loss and identity theft by quickly recognising and warning you of suspicious transactions. AI systems can monitor fraudulent activity patterns and spot anomalies instantly, enabling early detection and a decrease in fraudulent transactions. This is achieved by using a set of algorithms that monitor incoming data and block fraud threats. This happens when AI learns from historical data and adjusts its rules to stop threats it may not have seen before.
Using AI to detect threats has a number of benefits, for instance, according to datadome, it takes the best AI to process incoming data and block new threats in a matter of milliseconds. It offers excellent security because of how dynamic and quickly it moves. Over time AI gets better with its predictions.
Additionally, AI-powered authentication technologies like speech and biometric recognition add an extra layer of protection, making it more difficult for unauthorised users to access personal financial information. In the digital age, where cybercrime is a constant threat, use whatever means necessary to protect yourself.
Automation is perhaps one thing that could be taken as something negative in most industries, as it is seen as replacing jobs but let’s think of it this way, imagine if you had to handwrite everything you do. That would take a huge amount of time especially if you are to make copies of the document.
Technology is there to help you drop all the repetitive and time-consuming activities so you can concentrate on more important things, like growing a business or acquiring skills to offer more value to what you are doing. AI can automate common financial tasks like investing and budgeting. It allows you to keep track of your earnings, expenses, and financial transactions, giving you access to real-time financial data.
By using machine learning algorithms, AI platforms can classify expenses, create budgets, and even suggest specific financial plans depending on your spending habits. This automation frees up time and reduces the potential for human error. While also promoting better financial planning and discipline.
Financial literacy is having the ability to comprehend how the financial world operates and then apply that understanding to actively and successfully engage with it. That means possessing knowledge of every day as well as important financial aspects of life, such as money management, saving, budgeting, and investing. Financial illiteracy is the absence of these abilities.
A chance to invest, manage debt, rise up the ladder, and save for and eventually enjoy retirement can easily be lost if you lack financial literacy. Being financially illiterate can have a major impact on how you make financial decisions, it can affect your ability to afford healthcare or you might be more susceptible to scams, being less acquainted with the many ways people are trying to defraud you. It affects every aspect of your life beginning from adulthood.
AI-powered virtual assistants, such as chatbots, are becoming more common in personal finance apps. AI chatbots can be a useful financial teaching tool. On top of that, AI chatbots instantly respond to questions. These virtual assistants can provide information, financial advice, and aid in a range of financial activities. You can text or use voice instructions to communicate with these virtual assistants and you will get prompt responses and guidance.
Virtual assistants powered by AI offer specialised support, enabling you to manage your accounts more effectively and comfortably. You can learn at your own pace and ask questions about various financial issues or topics, improving your financial literacy.
It’s safe to say that artificial intelligence has ushered in a new era in different aspects of our lives and with new AI products and technologies constantly being invented, the evidence of its impact is more obvious than ever before.
Artificial intelligence has revolutionised how people do personal finance by providing them with intelligent tools and insights to help you better manage their finances. It has altered the way many approach their financial goals, from automated financial management and customised investment suggestions to increased security measures and predictive analytics.
Personal finance tools powered by AI are still in the early stages of development. You can anticipate even more advanced solutions in the upcoming years that will meet your specific financial needs and make managing our money easier and more effective than ever.
We could weigh the pros and cons of incorporating AI into our everyday activities but one thing for sure is AI is here to stay. It's not a distant science fiction scenario but a reality that’s rapidly unfolding.