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November 23rd , 2024

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HOW AI IS CHANGING THE WAY WE MANAGE MONEY

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Introduction
Artificial intelligence or AI is now redefining various sectors, and personal finance is among them. In fact, in financial management, artificial intelligence can be used for; budgeting and investment advice, fraud detection, and even as a customer service tool. In this post, an overview of how artificial intelligence is becoming more lax, efficient, and available for managing personal finances.

1. AI in Budgeting and Expense Tracking
In my view, one of the important aspects in which AI is most beneficial is related to tracking of costs:


  • Automated Expense Categorization: Automatic categorization of purchases is done by AI enabled apps such as Mint, and Young, Nice, and Beautiful (YNAB for short).
  • Personalized Budget Suggestions: AI is used in the analysis of daily expenditures in order to better understand how it can be optimized to meet the user’s needs.
  • Goal Setting and Tracking: Appliances that incorporate AI make it possible for their users to input their desired savings targets and make recommendations and alerts that enable them to achieve those goals.


2. AI in Investing and Wealth Management
AI has made investment to be easier and informational:


  • Robo-Advisors: Currently, there is a rational utilization of artificial intelligence to create portfolio with Betterment and Wealthfront that rebalance the investment portfolio when the market shifts with the help of algorithms specific to investors.
  • Predictive Analytics: AI has the capability to make large quantities of data to read and determine potential investment areas and trends in asking investors.
  • Risk Assessment and Diversification: Some of the AI based tools take into consideration the level of risk that a user is willing to take into the market while others suggest for different portfolios in an attempt to avoid users to lose all their money.


3. AI for Personalized Financial Advice
That is why if a person requires having financial advice based on the analysis of vast amounts of data, it is possible to rely on AI:

  • Virtual Financial Advisors: Chatbots and virtual advisors are capable of delivering personalized financial planning advice and answers to queries at any time, and within the blink of an eye on everything ranging from managing debt to retirement.
  • Tailored Recommendations: AI analyzes previous spending and income, as well as set and achievable goals in order to provide personalized product recommendation and recommendations regarding spending strategy.


4. AI in Fraud Detection and Security
The greatest benefit that AI imparts to the financial organisation is the aspect of safety:

  • Real-Time Fraud Detection: AI constantly observes a user’s activities and observes patterns; it also identifies potential fraudulent transactions and minimizes fraud.
  • Biometric Security: Facial and voice recognition technologies that belong to the AI class enhance the levels of security in digital banking being under threat.
  • Behavioral Analytics: AI focuses on the transaction behaviors that can be fraudulent and even strips away common usage profile.


5. AI in Credit Scoring
Conventional credit rating excludes individuals with little or no record of credit repayment. AI presents solution that is different:

  • Alternative Credit Scoring: One of the advantages of AI is that in turn, it can estimate creditworthiness based, for example, on utility bills or rental history, thus allowing for increased number of people to obtain credit.
  • Real-Time Credit Monitoring: Consequently, there are AI applications for credit score reporting and recommendations on how to enhance that score immediately.


6. Pros and Cons of AI in Money Management
However, there is more to AI than just the opportunities that are why one should take into account the following:

  • Pros: More precision, high-level recommendations, repetitive labor optimization, and improved check against frauds.
  • Cons: Issues of privacy as well as risk of dependency, and the possible risks associated with algorithmically decision-making, for example in credit of loans.


Conclusion
Money management is one of the fields that is being revolutionized by AI as individuals are given tools to solve their problems. On the one hand, personal finance can be enhanced with the help of artificial intelligence; on the other hand, the latter must be employed effectively and accompanied by knowledge. This means that as AI is more developed, it is going to play a bigger and bigger part in our financial lives and thus make managing these finances easier than it has ever been.

 

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Daniel Aryeetey

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