We’ve entered a new age in human history. Whether we like it or not Artificial Intelligence (AI) is leading the charge. Its resonance will be felt everywhere from our household budget and government policies, to our healthcare, food and jobs. There’s no part of our lives that, eventually, it won’t impact. Saying it that way may make it tempting to put the genie back in the bottle, but that’s not an option anymore. It’s out and we’ve gone well past the point of no return with AI. That leaves us with just one option, get informed, especially when it comes to its effect on important topics like personal finances.
What is Artificial Intelligence?
AI is somewhat like a mass producer of Coles Notes or executive summaries. Its magic sauce is distilling impossibly large amounts of data into a manageable chunk of information that we humans can absorb. For example, enter a prompt into ChatGPT and it goes scouring the internet for any and all content related to the prompt. What pops out is a summary of all of what it’s found.
Don’t be fooled into thinking AI’s the same as any old search engine like Google. It’s much more than that. AI’s power comes from its ability to instantaneously filter and reformat data in whatever way the user needs. In fact, the more specific the prompt the better and more helpful it becomes.
There might be a temptation to think that AI and ChatGPT are synonymous, but that’s not the case. There’s a well-known analogy that all Jacuzzies are hot tubs, but not all hot tubs are Jacuzzies. Similar to Jacuzzies, ChatGPT is just one version of AI. Countless other versions have been adapted for specific uses. Some of which are geared towards personal finances.
AI and personal finances
There’s a line in the blockbuster hit Twister that goes, “It’s already here!” The same thing can be said for AI and personal finances. In fact, 42% of the respondents of an Oliver Wyman survey said they would use AI to help guide large financial decisions. Financial institutions and apps are already using AI without many people even being aware. They’re using them for things like:
- Expense tracking
- Personalizing household budget
- Savings recommendations
- Chatbots
- Fraud detection
- Product recommendations
- Voice recognition and multi-factor authentication
- Debt repayment plans and strategies
- Credit score management and improvement
- Investment strategies and planning
- Financial literacy
These are just the beginning of AI’s integration with personal finances. We’ve just scratched the surface of what it will be. Financial institutions have eagerly embraced AI and have teams of people working on coming up with other ways to use it within the industry. We’re likely to see the outcome of their work in the not-so-distant future. Some areas of personal finances where we may see its influence soon are:
- Behavioural Finances and helping us understand why we spend our money the way we do.
- Wealth and estate planning.
- Managing the home buying and selling process.
- Easier and faster tax filing.
- Greater blockchain integration into more mainstream financial platforms.
Is this good news or bad news?
The fact that AI has found its way into the world of personal finances is both good and bad news.
The good news
Function
When comes down to day-to-day function, humans just can’t compete with AI. AI can do in seconds what would take years, maybe even a lifetime, for a human to do. This increased speed leaves us humans with more time and energy for decision-making. Being able to adapt information so quickly opens up the opportunity for nuanced decisions. Every person can find the exact right fit for how they want to approach their finances. That’s a huge advantage, especially for such a significant aspect of a person’s life.
Accessibility
AI’s got us humans beat on accessibility too. It’s:
- Tireless and ready to work 24/7.
- Great at simplifying complex subjects and breaking them down further when needed.
- Able to use its massive reach to help those underserved until now.
AI’s greater accessibility, in every sense of the word, makes everything from building a household budget to investing in stocks easier.
Human factor
An unexpected benefit to AI is that it isn’t human and therefore has no emotions. A big barrier to getting financial help for many is a fear of being judged. Eliminating this factor will mean more people getting the help they need earlier, or even avoiding issues altogether. What’s ironic is that the Oliver Wyman survey from earlier also revealed that people, even in its early stages, are feeling connected to AI in a very human way. Specifically, it indicated:
28% of respondents believe AI can capture the depth of human emotion.
14% of respondents prefer using AI because they believe AI is more emotionally intelligent than humans.
AI is a great equalizer. It doesn’t care about someone, race, gender, sexual orientation or anything else that we humans get tripped up with sometimes. It simply takes in information and then spits out results. No questions asked.
The bad news
Accuracy limitations
In the world of analytics there’s a saying that goes, garbage in, garbage out. In other words, the value of the information you get from AI is only as good as the information it has access to. If AI is using inaccurate, outdated, or incomplete data it affects the value of the information you get back from it. The only way around that is to remember that AI is simply a tool, it’s not infallible.
ChatGPT, for example, has a couple of important flaws to be aware of. It’s been known for missing the mark on simple calculations when being used to create a household budget. To be fair, unlike other AI platforms, ChatGPT wasn’t specifically created to do calculations so isn’t the best AI option for creating a budget. There are other AI platforms that are math masters. That flaw is relatively easily correctable, there’s another flaw that isn’t as easily fixed. ChatGPT relies on content from the internet, which isn’t exactly real-time. A search is only as accurate up to the time it was completed. As soon as any changes occur, the information is out of date. While the same can be said for humans, it’s much easier to forget when using AI.
Privacy and security
A couple of the biggest concerns around AI are privacy and security. AI is a portal into cyberspace. Any information that crosses an opening into cyberspace has the potential to be accessed and misused. Do your due diligence to mitigate these risks.
- Only give AI access to the information you are okay with potentially being misused.
- Verify the legitimacy and reliability of the AI platforms you use.
- Be extra cautious when on public devices or internet connections.
- Verify the data output and sources.
- Update passwords regularly.
Human factor
While AI itself doesn’t hold any biases the people that made it do. It’s no intentional fault of their own, it’s just inevitable that a creator’s humanness will seep into their creation. For example, many AIs rely heavily on the internet. A lot of data on the internet is based on the “Average Joe” and “Average Jane”. Those who don’t fit into these profiles, at times, may not get the most useful help from AI.
One example of this was when a team of developers noticed their AI model wasn’t always correctly identifying men and women in photographs. As they dug into why, they realized the AI was using makeup as an identifier for women. Any pictures of women not wearing makeup were identified as male and men wearing makeup were identified as female. It’s not like the developers sat there and purposefully taught AI to do this, but somewhere along the way, that’s what AI learned.
Just being aware of these limitations goes a long way to mitigating their effects. There are a few things you can do to go even further.
Tips for using AI
When used correctly, AI is a powerful tool that can increase productivity significantly. Below are some best practices for making the most of its productivity-producing powers while navigating its current limitations.
- Don’t shy away from using AI. In fact, its present and potential impact on the world makes it important to use it to understand it.
- Verify. Verify. Verify. Don’t take AI at its word. Use it and then take time to verify the information it gives you.
- Before offering up any sensitive data like your banking information to any AI platform, research the company using it thoroughly. Never put sensitive information on any public AI platform.
- Use the right AI for the project you’re working on.
- Make a habit of keeping up-to-date on AI news so you know what’s happening and can adjust as it evolves.
- Use AI to set yourself up for success. AI is a great tool for getting a baseline of information on just about any topic. Before meeting with a professional, such as a financial advisor, use AI to learn and prepare key questions. This will help you make the most of your time with the advisor.
Summing up
AI is a powerful tool that’s very much still evolving. Within the world of personal finances, it’s already gone far beyond the building of the household budget and will continue to go even further. AI has quickly taken a foothold in today’s society making it important to take steps to familiarize yourself with it in a safe way. Right now, AI is best used as a starting point. Use it to learn about a topic, like debt management, and then meet with experts, like our Credit Counsellors, to verify the information and take the next step.
