What effect does AI have on personal finance?

3 min read
finance application

Artificial intelligence is a vast and complicated field. AI can range from simple algorithmic functions to neural capabilities that might someday even simulate consciousness, and yet we often take it for granted in our daily lives. AI and machine learning processes now power many of our financial technology (fintech) services and connect investors with a broader range of quick solutions. 

For personal finance, AI works wonders. It can change the way you plan and budget for the future by automating the tedious elements, monitoring the issues, and improving the outcomes that comprise personal finance. 

Here are some of the most promising applications of AI in personal finance. 

Automating the tedious

Whenever AI comes up, the topic of automation isn’t far behind. This is because AI by its nature creates automation potential. AI is typically defined as software that performs a function previously thought of as requiring a level of human-like intelligence. As you might imagine, this definition encompasses a broad range of applications. However, it’s automation that triggers the biggest reaction from the public — and for good reason. 

Automation has the potential to displace workers and cause an economic shift. Though some experts estimate that AI automation will create more jobs than it ends, there is no doubt that thousands of workers will find it impossible to transition into a new kind of workforce. 

When it comes to personal finance, however, AI automation can take over tedious things. Creating a working budget requires a lot of calculations and consideration of variables. Rather than carefully monitoring such a budgeting plan yourself, you can apply the help of AI software to craft solutions for you and automate best practices. 

Building an automated savings plan is one of the best steps you can take when saving for a downpayment. That’s because an automated plan is harder to neglect or put off for another month. Artificial intelligence defies expectations by more easily solving problems that are hard for humans—like sticking to a budget. It’s the things humans find relatively easily—like not bumping into things—that give machines a harder time. 

While it can’t automate everything, AI can take much of the hassle out of making and sticking to a budget. From there, it can also help you monitor potential issues with your personal finances. 

Monitoring the issues

One of the most promising features of AI is its ability to monitor systems and react to certain circumstances. Financial institutions are leveraging the power of this tool to offer unprecedented self-service solutions for their customers. Typically, this takes the form of mobile applications that track spending and alert users to likely instances of fraud.

AI makes this possible by modeling thousands of instances of fraud, then examining incoming data for warning signs in real-time. The system looks for information like purchase amount, card, and a user’s location. From here, it can get a better sense of how someone manages their personal finances so that fraudulent activity becomes clear. 

Teradata is an example of an AI firm that offers financial technology solutions to its clients. In one instance, Teradata helped Dankse Bank bring its processes in line with modern industry while reducing the 1,200 false positives in fraud detection the bank had previously experienced. 

By offering individuals transparency and alertness over their finances, AI is acting to enhance the human experience. It offers each of us the ability to monitor and act on our financial data from the convenience of a smartphone. With these constantly advancing tools, individuals can improve their financial outcomes in a variety of ways. 

Improving financial outcomes

AI can be the key to a financially independent future for users who apply it with care and attention to detail. Like all financial tools, AI can have mixed results if not created and executed clearly. You should treat your use of AI in fintech the way you’d treat a digital will: by drafting clear instructions about what you’d like it to do then inventorying every point of value. 

AI offers powerful benefits for users that apply it to financial goals. Again, saving money is one of the most important financial outcomes that personal finance software can help with. For the up-and-coming generations strapped with student debt, navigating payments might only be possible in many cases with the help of smart financial tools.

Take the case of Tally, a personal finance app that uses AI to help users save. The algorithm helps guide the user’s budget decisions based on the goals they’ve put into the app. For one user, this worked so effectively that she was able to cut down her debt by $10,000 in two years. 

The effectiveness of AI tools in improving financial outcomes is a huge positive for future generations. Already, we are seeing more manageable debt and better credit scores from Gen Z versus their millennial predecessors, and while this may be a symptom of economic trends, mobile and digital literacy undoubtedly play some role in this financial success.

All it takes to manage an effective budget is persistence and awareness. AI offers these features in plenty while adapting personalized solutions for every user based on their data. In the future, these features will be increasingly applied in the day-to-day financial management of the average consumer, leading to more informed spending practices and better outcomes. 

Tools like AI in personal finance prove that tech can make a real difference in how people manage their money. Consider AI in your own use of fintech systems to experience the benefits for yourself.

1 COMMENT

  1. It’s becoming clear that with all the brain and consciousness theories out there, the proof will be in the pudding. By this I mean, can any particular theory be used to create a human adult level conscious machine. My bet is on the late Gerald Edelman’s Extended Theory of Neuronal Group Selection. The lead group in robotics based on this theory is the Neurorobotics Lab at UC at Irvine. Dr. Edelman distinguished between primary consciousness, which came first in evolution, and that humans share with other conscious animals, and higher order consciousness, which came to only humans with the acquisition of language. A machine with primary consciousness will probably have to come first.

    The thing I find special about the TNGS is the Darwin series of automata created at the Neurosciences Institute by Dr. Edelman and his colleagues in the 1990’s and 2000’s. These machines perform in the real world, not in a restricted simulated world, and display convincing physical behavior indicative of higher psychological functions necessary for consciousness, such as perceptual categorization, memory, and learning. They are based on realistic models of the parts of the biological brain that the theory claims subserve these functions. The extended TNGS allows for the emergence of consciousness based only on further evolutionary development of the brain areas responsible for these functions, in a parsimonious way. No other research I’ve encountered is anywhere near as convincing.

    I post because on almost every video and article about the brain and consciousness that I encounter, the attitude seems to be that we still know next to nothing about how the brain and consciousness work; that there’s lots of data but no unifying theory. I believe the extended TNGS is that theory. My motivation is to keep that theory in front of the public. And obviously, I consider it the route to a truly conscious machine, primary and higher-order.

    My advice to people who want to create a conscious machine is to seriously ground themselves in the extended TNGS and the Darwin automata first, and proceed from there, by applying to Jeff Krichmar’s lab at UC Irvine, possibly. Dr. Edelman’s roadmap to a conscious machine is at https://arxiv.org/abs/2105.10461

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