With the rapid advancements in artificial intelligence (AI) and automation, individuals now have access to powerful tools that can assist them in managing their finances more effectively. However, there are limitations to what AI can achieve, and relying solely on technology to fix one’s financial woes may not be the best approach. While AI-powered applications like ChatGPT can provide helpful insights, they cannot replace the role of human judgment and decision-making. Let’s take a look, how AI can aid in financial management and why it should only be used as a supplementary tool rather than a complete solution.
The limitations of AI in personal finance
Despite the growing popularity of AI-powered applications like ChatGPT in various aspects of life, their potential in the realm of personal finance has its limitations. ChatGPT, for example, relies on existing information available on the internet and lacks access to real-time data, such as interest rates, stock prices, bank fees, and insurance policy prices. While it can provide general financial advice, such as paying down high-interest debts and considering investment options, it cannot offer personalized solutions or tailor recommendations based on individual circumstances.
According to an associate professor, Dr. Eun Young Oh, AI tools such as ChatGPT should be considered supplementary to one’s own judgment rather than a replacement. This perspective emphasizes the significance of human engagement in financial decision-making and underscores the need to treat AI recommendations as just one among several sources of information rather than as the ultimate authority.
The role of automation in financial management
While AI may have its limitations, automation, on the other hand, offers practical ways to enhance financial management and savings habits. Automation involves giving instructions to apps or software to handle financial tasks automatically, such as setting up monthly withdrawals for savings or creating sinking funds for specific expenses.
Budgeting expert Caz Mooney explains that automation can be beneficial for individuals as it helps to ensure that money is allocated towards specific goals consistently. For instance, apps like Revolut’s “Pockets” function can automatically add the right amount of money to different expense categories on payday, reducing the need for constant manual budgeting and providing a psychological boost in achieving financial goals.
Some banks and fintech apps offer “round-up” tools, which automatically round up purchases and save the spare change. This small change adds up over time, contributing to an emergency fund or savings. While automation offers convenience and ease, financial expert Eoin McGee warns against relying solely on automation without actively engaging in one’s finances. He emphasizes the importance of regularly checking accounts and staying vigilant to avoid any potential financial setbacks.
The interplay of AI and human judgment in finances
In the end, AI and automation have become valuable tools for managing personal finances. AI-powered applications like ChatGPT can provide helpful advice but should not be solely relied upon for financial decisions. Instead, individuals should use AI as a supplementary resource and actively engage in their financial management. Automation, on the other hand, offers practical ways to enhance savings and budgeting, provided it is used in conjunction with regular monitoring and human judgment. By striking a balance between AI assistance and human involvement, individuals can optimize their financial well-being and work towards their financial goals with greater confidence and control.
Source: https://www.cryptopolitan.com/relying-ai-personal-finance-risky/