Which Major Should I Choose Between Finance and Economics?
Finance and Economics are blatantly two different disciplines but there are several similarities they share and influence each other. Both these fields of study are related to economy and money. Both sectors have amazing numbers of career opportunities in the job field. Yet some differences are seen between them such as when you look at their direction of the study & jobs. Another difference is studying Economics is more academic & abstract in nature where as finance classes trend to be more practical. Economics major is related to the study of production, consumption & distribution of goods and services. On the other hand, the skills learned in Finance are highly practical.
Economics will help you to get the explanation of a fair price of an item is the intersection of demand, supply, marginal cost and marginal utility which is not always useful real life practice. People want a number and billions of dollars are at stake in proper pricing of loans, annuities, deposits, insurance policies and so forth. This is where finance plays it’s vital role – establishing the theoretical understandings and actual models that allow for the pricing of risk and valuation of future cash flows for the pricing of risk and valuation of future cash flows.
Students sometimes become confused in the time of choosing their majors. The post on selecting a major from Economics and Finance will discuss the differences between Economics and Finance major. It will also discuss the relation between these two subjects and the benefits if someone wants to pursue a dual major, combination of Economics and Finance. It will elaborate the learning and career benefits of both subjects. It will discuss some careers of finance and economics. The sole purpose of this post is to give an in depth idea of Finance and Economics major.
Advantages or Benefits of Finance Major
The advantages of finance major are many. Those who are finance graduates have to go through variety of classes which make them a well designed graduates. They go through classes likes of financial management as well as investments and institutions Their demands in financial markets are so high. Generally finance offers more jobs that are highly ranked and high-paying and these include corporate finance, investment banking, hedge funds and other investments etc. It is seen that for a finance graduate lots of opportunities are available.
Finance is a comprehensive term that covers a number of categories such as personal finance, public finance and corporate finance. Majoring in finance is based and focused on interest rates, risk management, rates of return, financial market and other business related topics. Majoring in finance can lead to a number of career opportunities can choose from several careers including financial analyst, financial advisers, bankers, fund managers etc. In some aspects, a degree of finance background opens more doors of opportunities than a background of economics.
According to the U.S. Bureau of Labor Statistics, demand for the average occupation will increase by 14.3 percent through 2020.
Finance from Professional Point of View
Finance professionals can be a financial analysts who can advise individuals and other businesses about investment based on analyzing the market, stocks and bonds. Financial analysts can do job in investment firms, insurance companies and government agencies.
Finance individuals can become personal financial advisers as well. In the coming years personal financial advisers are expected to be in great demand, with having 27% increase in employment by 2022 according to BLS.
If we look at common income of these two major professionals then it is clear that the common income is typically high with both degrees, but a finance degree is somewhat better.
Disadvantages of Choosing Finance as a Major
There are some disadvantages in majoring finance as well. Finance graduates have to research a lot which is very time consuming. They have to collect data and information with a significant amount. Their work is not only bounded in collecting data but also to do analysis properly and have to discuss with others. To approach financial questions, finance professionals have to learn a lot otherwise they have to call for experts. This job also includes costs. The lengthy the research project is, the amount of cost will be high. Once the financial research is finished finance professionals must revise it and do so often.
Advantages of Economics Major
Economics major also has some advantages. Students get training in economic analysis while doing economics major which helps them in every aspects of life. For example, studying economic theory, trade-offs, and pricing enable students to understand how businesses, governments institutions and even individuals make decisions about spending and policy. Economics major has covered both macro and micro economics whereas finance is only one aspect. Doing major in economics opens up major opportunities for economists. Economists may be hired too in financial and investment institutions such as banks, research and policy institutions, universities, corporations and multi-national companies.
Economics major helps the graduates to develop their skills that will be used in different disciplines. Economics students are primarily trained in quantitative analysis, which involves comparing different factors such as demand, supply and trends using mathematical methods. Economics enable them to consider sets of data from any field such as engineering, health, public administration or marketing and to think creatively and analytically to devise mathematically verifiable and statistical solutions.
Based on data from the US Bureau of Labor Statistics, average job growth for economics is higher than finance majors. Range of job growth is also higher than finance which is 6 to 32%. Economics is far ahead of finance in this regard. Having said that, a top economist at for example the World Bank would be much better off than a run-of-the-mill financial analyst in a mid-size firm.
Disadvantages of Economics Major
Economics major also has some drawbacks too. Economics as a social science makes research on how people produce, distribute and consume goods & services. This means that economics is more or less is dependent on human behavior which can be irrational and unpredictable. This is why, economists have a certain limitation to forecast accurate market performance and they do not know exactly how certain policies will affect different sectors and economies. In addition, the field of economics suffers from the problem of non-replicability. It is impossible to recreate all market conditions or be certain of predictions based on how markets have behaved in the past under similar circumstances. Because the field of economics cannot provide concrete conclusions, it is susceptible to criticism from a variety of sources.
Which one should we choose? Finance or Economics?
Comparatively, if we think which major is more important then we should go for finance major in terms of different points. Finance is better because you can simply and literally just read economics like reading your favorite novel. But with finance there are a lot of technicalities you need to know about business and you need a school for that. Economics majors play with many data for predictive analysis but they have no idea how those data were taken and those data were not accurate as well. Economics is good but job wise finance is the route. Based on data from the US Bureau of Labor Statistics, average salary for finance professionals is higher which is $79,2703. Range of Salary is also higher for finance professionals which is $62,870 – $109,740.
Finance and economics careers can be divided into major branches where finance major has more branches than economics. finance has three major divisions according to US Bureau of Labor Statistics:
- Personal Finance
- Corporate Finance
- Public Finance
Whereas Economics has two major branches:
- Macro Economics
- Micro Economics
Choosing Finance and Economics as a Combined Major
If students wish to get benefits from both economics and finance, they can take double majors or combined major which is known as financial economics. Financial economics mixes economic theory and modern finance in a way that fulfill the needs of students who have interests in both courses and who want to apply their expertise in their careers. Finance majors and economic majors are highly demanded majors. Combination of these two subjects will create high chances of getting jobs and higher salaries.
So before choosing your major, make sure you know their fields very well. Job growth, salaries, major branches and relevant skills all will help you in making your decision. Choosing between an economics degree and a finance degree can be difficult because they seem so similar but there are some major differences when you consider the specifics.
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Author: Sadnan Bin Sattar
Sadnan is one of the top contributors of Gotabout Business Strategy and Analysis. He is an undergrad student of North South University; major is Finance and Accounting. He has a strong interest in strategy development.