Money vs. Finance

Main Difference

The main difference between Money and Finance is that the Money is a object or record accepted as payment and Finance is a academic discipline studying businesses and investments

• Money

  Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The main functions of money are distinguished as: a medium of exchange, a unit of account, a store of value and sometimes, a standard of deferred payment. Any item or verifiable record that fulfils these functions can be considered as money.

  Money is historically an emergent market phenomenon establishing a commodity money, but nearly all contemporary money systems are based on fiat money. Fiat money, like any check or note of debt, is without use value as a physical commodity. It derives its value by being declared by a government to be legal tender; that is, it must be accepted as a form of payment within the boundaries of the country, for “all debts, public and private”. Counterfeit money can cause good money to lose its value.

  The money supply of a country consists of currency (banknotes and coins) and, depending on the particular definition used, one or more types of bank money (the balances held in checking accounts, savings accounts, and other types of bank accounts). Bank money, which consists only of records (mostly computerized in modern banking), forms by far the largest part of broad money in developed countries.

• Finance

  Finance is the study of money and how it is used. Specifically, it deals with the questions of how an individual, company or government acquires the money needed – called capital in the company context – and how they then spend or invest that money.

  Finance is, correspondingly, often split into three areas: personal finance, corporate finance and public finance.At the same time, finance is about the overall “system”

  – i.e. the financial markets that allow the flow of money, via investments and other financial instruments, between and within these areas;

  this “flow” is facilitated by the financial services sector.

  A major focus within finance is thus investment management — called money management for individuals, and asset management for institutions — and finance then includes the associated activities of securities trading, investment banking, financial engineering, and risk management.

  More abstractly, finance is concerned with the investment and deployment of assets and liabilities over “space and time”:

  i.e. it is about performing valuation and asset allocation today,

  based on risk and uncertainty of future outcomes,

  incorporating the time value of money (determining the present value of these future values, “discounting”, requires a risk-appropriate discount rate).

  As an academic field, finance theory is studied and developed within the disciplines of management, (financial) economics, accountancy and applied mathematics.

  Correspondingly, given its wide application, there are several related professional qualifications, that can lead to the field.

  As the debate to whether finance is an art or a science is still open, there have been recent efforts to organize a list of unsolved problems in finance.