From handling unexpected bills to keeping track of expenses, managing our personal finances is far from straightforward. To start with, creating a workable budget is very time-consuming and it involves a lot of complex sums. Then, once in place, there’s the mental anguish every time life throws up something unexpected that knocks us off our stride.
With these complications in mind, people are increasingly turning to AI-powered apps to manage their finances more efficiently. This is especially true for younger generations with one in five Gen Z adults currently using AI-automated savings tools.
So, why are so many people turning to AI-enhanced apps to manage their finances? And how exactly does artificial intelligence and machine learning help people meet their financial goals?
How AI can help us save money
“The art is not in making money, but in keeping it” goes the famous proverb. Fortunately, AI algorithms are aware of our difficulties in setting aside funds for long-term goals and they have lots of intelligent solutions to help us keep more of our income.
For instance, many banking apps can automatically move a percentage of an individual’s earnings and place it directly into a savings account, removing the instant temptation of going on a spending spree. Users simply set the amount they wish to save and select a specific date for the money to be withdrawn and the app will automatically complete the transfer every month.
AI, apps and our spending
Some apps go even further and can separate users’ transactions into categories such as groceries, entertainment, or utilities based on transaction descriptions and the names of the companies to which the payments were made, providing users with a more accurate picture of where their money is going without them having to sift through an entire month’s worth of transactions.
Over time, the machine learning algorithms that power these apps will also help the tool better understand both our preferences and spending patterns, helping us spot potential savings.
How AI tools can help us plan our finances
Once AI-enhanced tools have an accurate picture of our spending habits, they can do far more than simply suggest savings – they can generate budgets that are tailored to meet future aspirations like retirement or specific family needs. Using historical data and current income, AI forecasts likely future scenarios, helping us make better-informed financial choices and plan accordingly.
However, as we all know, the hardest part of a budget is having the willpower to stick to it. Here, AI can also help keep us on track with timely reminders and prompts. Constant monitoring of financial activity allows chatbots to communicate with users immediately after purchases. For instance, a message might say “purchasing [said item] has pushed your long-term savings goal back 3 months”, helping users stick to their budgets and avoid unnecessary spending.
AI, data analysis and insights in real-time
Without question, one of the key advantages of AI is its unparalleled ability to analyze seemingly endless amounts of data, identify patterns and make recommendations to users in real-time. Here, chatbots can also make a big difference by sending alerts not only about excessive spending but also potential opportunities. For instance, many AI-powered apps use real-time performance data to provide options to invest tax refunds.
Equally, some apps can also provide additional information to help improve decision-making and overall financial health. Chatbots are capable of responding to queries on a whole range of financial topics and can provide users with up-to-date information regarding price rises, factors that influence credit scores and more. Better still, thanks to Natural Language Processing, chatbots learn from previous interactions with humans, resulting in better responses and a user-friendly experience.
Security: How AI keeps bad actors in check
Another benefit of AI tools being able to analyze so much data in real-time is improved financial security. Combined with biometric authentication, speech recognition and the existing knowledge of a user’s spending patterns, AI is capable of flagging irregular and potentially fraudulent activity in real-time, helping to keep bad actors in check. This intimate knowledge of users’ spending patterns has also helped to reduce the number of inaccurate security alerts.
Of course, AI has a whole host of benefits beyond enhancing security and helping us manage our personal finances. AI has transformed entire industries by automating repetitive tasks and assisting employees with valuable customer insights.
Find out more about how AI is transforming financial services and customer experiences in the Tech section of our blog.
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