AI can help you save, but don’t rely on it to fix your finances

The rapid advances in artificial intelligence (AI) coupled with the public’s increased access to technology thanks to ChatGPT has produced two schools of thinking.

The first is wariness that the robots will do us out of jobs and eventually the world if the technology is left unchecked. Which is not entirely irrational, considering the current Hollywood actors and writers’ strike centering on the use of AI to replace creatives.

Then there is the other school of thought of working out what boring, annoying or hard tasks you can offload to AI to make your life easier. Asking not what you can do for technology but what technology can do for you.

Websites are scrambling to post headlines like “How to use ChatGPT” to do anything from write a CV, to script a break-up text and, of course, manage personal finances.

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While the news outlets are ripe with articles on how to use the freely available application to “save money” or find ways to slash bills, once you dig a little deeper it’s clear ChatGPT won’t be giving up its day job to become a financial adviser any time soon.

The limitations of the language-based chat bot means it doesn’t have access to real time information on interest rates, stock prices, bank fees or insurance policy prices. It will not give you specific advice if you ask a question like how should I invest €500?; all it can do, so far, is read information available on the internet and synthesise it down in digestible chunks.

It can tell you to pay down your high-interest debts, start an emergency fund, put your money into high-yield savings and consider ETFs (exchange-traded funds). All information that even the most basic Google search would reveal. Because it relies on information already available so far, ChatGPT and applications like it can’t step in and manage your money. It functions more like an average blog post, leaving the individual to decide and implement the next steps themselves.

On a professional level, AI is already in use in the finance industry. Algorithmic trading is the old kid on the block but it still requires human input to make rules and set up “if-then” actions to tell it what to do and when. AI trading takes that one step further with the machine analysing the data and making the investment decisions itself, to put it crudely.

AIEQ, the “artificial intelligence powered” ETF currently trades on Wall Street billing itself as the “first actively managed ETF to fully utilise artificial intelligence as a method for stock selection”. According to the fund’s website, the technology used “analyses millions of data points” and is “equal to a team of 1,000 research analysts, traders and quants working around the clock”.

So far it has produced mixed performance results against the S&P 500 despite doing well in early 2023.

In her article for The Conversation, associate professor Dr Eun Young Oh wrote that while AI could potentially give consumers access to “virtual personal finance assistants”, tools like ChatGPT “should only be used to supplement your own judgment, not as a replacement” given their limitations.

While AI advances aren’t there yet or accessible enough to the majority of us to hand over complete responsibility for our bank balances to a machine, there is something else that may help: automation.

Automation means giving directions to an app or software about how much money you want to send, where it goes and how frequently. For example, setting up a monthly withdrawal of €100 on payday and sending that money into a separate account or space inside your banking app labelled “Christmas present fund”.

The money comes out without you thinking about it or having to go through clunky sign-in pages, or worse, spending it without realising.

Most of us are no stranger to direct debits and have long used them to take payments for debts, rent or bills straight from our account in order. They can be handy for those of us who might forget the due dates of the odd bill but still want to dodge late payment fees and disconnected services without having to use much mental energy.

But the same principle can also be used for budgeting and paying yourself.

Budgeting expert and author Caz Mooney said tools within apps such as Revolut’s “Pockets” function can help create sinking funds for expenses such as holidays, groceries and nights out. They can be used not only to create a budget but to actively add the right amount of money to each area automatically on payday.

“Once you’re always putting certain amounts towards something, you don’t need to stress about it because that money is always going to be there and once it’s gone [from your main account], you don’t think about it again,” she said, stressing the psychological benefits of allocating money straight away into different purposes.

“Then you’re always taking steps towards whatever goals you might have.”

Aside from setting up automatic savings funds, various apps can also build your savings in a sneaky way useful to those of us who find it difficult to put money aside consistently.

Look for “round-up” tools in banks and fintech apps that will automatically round up every purchase to the nearest whole number and stash the spare “change” into your savings. For example, if you buy The Irish Times paper on a Saturday for €3.90 – it will round it up to €4 and send the extra 10c to your account.

An Post, N26 and Revolut offer accelerators which means you can multiply up to 10 times the amount of whatever money is rounded up and it will take that off the purchase and into a separate space.

If you were to set the feature to five times, then your daily €3.50 coffee could give you a savings pot of €456.25 in six months from your flat white habit alone. Considering we routinely lose €2.50 down the back of the sofa, it’s unlikely you would notice it slipping out of your bank account every day to form a handy little emergency fund when you need it.

While Mooney is a self-described “pen and paper” person, she does see how automation can also help stay on top of where their money is going thanks to monthly auto-generated reports.

“For people who are busy and want to see everything on their phone in one place, probably the An Post app is the smartest one I’ve seen,” she said.

However, “setting and forgetting” your money can have its disadvantages.

While Eoin McGee, author and host of RTÉ’s How to be Good with Money, welcomes “anything new that gets people taking control of their finances”, automation may not be doing us any favours by making us think less.

“My issue is the automation piece of it, anything you get done automatically you don’t appreciate as much as if you put hard graft into it to achieve,” he said.

McGee gave the example of examining the finances with guests on his show and pointing out that every time they went to Penneys they spent €21 to get them thinking about their money habits and triggers in order to make positive changes.

“But if you’re going through your phone and looking at an spending average, it’s a brief fleeting moment” that may not have the same impact.

“That’s my concern,” said the money expert.

As are direct debits or savings automations that could bounce as a result of not having enough funds in an account or a pay run being late.

These could present as red flags to banks for people going for a mortgage. Alternatively, precious funds could be automatically diverted into a high-yield account without instant access on the same day the boiler breaks and the car breaks down. Or invest cash into stocks like it does every month but on the week of a market crash and redundancy announcements at work.

Automation means consumers “can lose some control by assuming the automation is correct”, warns McGee. “You need to create a trigger for yourself to check your accounts on a regular basis.”

There is also the possibility that the “set and forget” automation of certain expenses means you don’t notice them creeping up or notice when a “special offer” rate ends. It could lead to less motivation to negotiate a better deal for things that renew annually, doing yourself a disservice.

While the robots might become our eventual overlords, we can’t rely on them completely just yet to manage our finances without doing our due (and human) diligence.