'I worry AI will make me redundant. Should I be saving €100k just in case?'

Welcome to The Money Coach, a Times of Malta column where readers can ask questions about life's money issues. Send your questions about personal finances, inheritance, gifting or other personal finance topics to moneycoach@timesofmalta.com

Dear Luca,

I’m a software engineer earning €75,000 gross per year.

My salary has been increasing every year for years, and I’ve always felt the only way is up. That is, until I started seeing how fast Artificial Intelligence is advancing, and how it can easily replace what I do if it continues to advance at this pace.

I am 38 years old, have a home loan, three children, and am the main breadwinner in the family. My husband earns half my salary. My job always felt the most secure, given the demand, and for years I also used to encourage my husband to change careers to refocus on the tech sector. 

Now, it all feels different. Two months ago, a software developer at my company was let go after seven years working with us, not too long after the company introduced certain AI tools that in a few hours could do what used to take his team days to do.

My husband keeps telling me that this was a one-off and that given my technical skills, my job is relatively safe.

I desperately want to believe him, but I am not so sure.

Recently, I was listening to a popular podcast which mentioned something that led me to write this email. It seems that the jobs most at risk are the highest-paying jobs, rather than low-paying jobs. The exact words were: AI can replace a brain working at a desk, but it cannot replace a pair of hands working in the real world.

This made me feel quite uncomfortable and given my salary, I’ve been thinking of building a bigger buffer when it comes to my emergency fund. I currently have €20,000, but I don’t think it’s enough anymore. I am thinking of saving €100,000, and halting my current investment contributions to reach that amount as soon as possible.

Do you think this is a sensible plan? Or you believe I am overthinking the whole thing?

Worried in Tech

Luca responds:

The fact that you are thinking about this now is good. You are anticipating a potential problem, rather than tackling it when it happens - that is a skill which few people possess.

You are right to worry. Many people believe that AI will threaten low-paying, repetitive jobs first. The data tells a completely different story. A study by Anthropic, the founders of Claude AI, found that workers most exposed to the threat of AI right now earn, on average, more than 50% more than roles with no AI exposure. 

Goldman Sachs has also listed software development amongst the occupations at higher risk in the coming years.

So, should you save €100,000 as a buffer?

Perhaps you should hit pause for a minute. Having €100,000 sitting in the bank doing nothing feels like a number born out of panic rather than a strategic plan.

You have €20,000 saved – and here comes my first question: How many months of your essential expenses does this amount cover?

Remember, think only of the essentials – home loan, groceries, bills. For someone like you I would say six months to one year's worth of these expenses would be ideal.

Now, if this number does come up to €100,000, then sure, go ahead and aim for that number. But you might be surprised at how low that number can go if you really dig deep and see what your most needful expenses are.

You mentioned halting your current investing contributions. While reducing them slightly to enlarge your emergency fund might be good, I wouldn’t halt them completely.

Balance is key here. Remember, consistency in the market helps you build something incredible in the long run. I have coached many people through periods of job loss, and the ones who got through it with the least damage were not necessarily the ones with the biggest savings. They were the ones whose money had been working quietly in the background for years.

But I want to leave you with something beyond the finances, because I think it is actually the most important part of your situation.

AI is very effective at executing tasks. It is still poor at judgment, at client relationships, at understanding context, at knowing when the technically correct solution is the wrong business decision.

Developers who can communicate clearly, who understand the business they are working in, who lead and manage complexity across teams are significantly less exposed than those who simply write code in isolation. I would encourage you to ask yourself honestly: what do I bring beyond the code itself? And how visible is that in my day-to-day work?

You are not overreacting. But you are also in a stronger position than you think. Use this period of clarity well.

Luca is the founder of the Money Coaching Hub. Email him your financial questions or your response to today's question for a chance to be featured in a future column.

Disclaimer: This column is intended to provide general information on various topics related to personal finance. The information provided is for educational purposes only and should not be construed as personalised financial advice for your specific situation. Financial decisions are highly individual and can vary greatly based on your unique circumstances, goals, and risk tolerance. The author of this column is not authorised to provide financial advice. Before making any financial decisions, it is recommended to seek professional financial advice from an authorised financial advisor.