Economics and Finance are very closely related. Both disciplines frequently intersect and influence each other, analyzing wealth management in the economy and closely monitoring the health of financial markets.
A great example of how related but different they are is that Economics studies regional buying and selling trends, influencing finances. Financial Analysis uses the findings of economists to maximize profits and returns by selecting good investments and minimizing risk.
A Quick Look At the Differences Between Economics and Financial Analyst
Other differences between Economics and Financial Analysis include educational training, average salaries, and job growth. If you’re only starting in college or want to shift careers, this guide is a perfect first step.
Check out the key differences between these two closely related fields.
| Economics | Financial Analysis | |
| Average Salaries | $113,940 | $95,080 |
| Job Growth | 6 percent | 8 percent |
| Benefits to Clients | * Provides insights into economic systems and phenomena. * Helps in understanding regional economic strengths and weaknesses. | * Assists in evaluating a company’s financial health and growth potential. * Helps in optimizing resource allocation and improving operational efficiency. |
| Certification/s Required | None | Chartered Financial Analyst |
| Education Required | Advanced degree (master’s or PhD) | Bachelor’s degree with Financial Analysis concentration/topics |
Despite (and because of) their differences, economists and financial analysts work hand-in-hand!
What is Economics?
Economics is a social science major that focuses on studying human life’s productive and distributive aspects. It aims to define a region’s economic strengths and weaknesses by studying its economic systems and the relationship among economic actors such as employer, worker, consumer, and seller.
Among the questions Economics focuses on include:
- Why are some countries poorer than their neighboring countries?
- Why do some regions have very low growth rates while others have high living standards and high growth rates?
- How can international commerce and capital flows between nations contribute to the explanation of these world disparities?
- Why do some nations perform much better than others at generating jobs and lowering unemployment rates?
- How can governments raise the necessary funds for income support programs and health and education services?
Many economists believe that knowing the US economy and its markets and market activity—buying and selling—is essential to understanding the economy and its behavior. On the other hand, some economists believe that understanding power dynamics and the hierarchical nature of economic interactions overpower traditional market-centric perspectives.
Economics: Education and Career Path
Economics is a vast major found in the arts or sciences. Students who pursue a BA in Economics focus on the liberal arts core, emphasizing humanities and critical thinking skills. On the other hand, students who choose a BS in Economics will focus more on STEM courses like calculus and statistics.
An Economics degree typically includes courses such as:
- Econometrics
- Economic Theory
- International Economics
- Principles of MacroEconomics
- Principles of MicroEconomics
While a bachelor’s degree gives you the fundamental knowledge required to become an economist, you can be overshadowed by those with a master’s degree. With a bachelor’s degree, you can pursue positions such as the following:
- Stockbroker
- Insurer
- Retail Merchandiser
- Pricing Analyst
- Statistician
- Financial Consultant
Most aspiring economists earn a Master’s in Economics degree or an MBA in Economics to improve their economic skills. Graduate-level Economics offers advanced courses, thesis, and capstone projects that are highly valuable in understanding broad Economics systems.
With a master’s degree, you can compete in higher-level jobs like:
- Economist
- Data Scientist
- Professor of Economics
- Senior Financial Analyst
- Data Analyst
You must obtain a Doctor of Economics degree to contribute to academic research and advancement. When pursuing a Ph.D. in Economics, you need to complete your dissertation featuring original and groundbreaking research in your field.
Economics ROI: Education Cost and Salaries
As an in-state Economics major, you can expect to pay an average of $10,794 per year during your undergraduate studies and $13,031 per year in graduate school. Do note that this is only an estimated figure, and the exact cost of your education will vary.
Economics majors can expect a substantial ROI. Economists with a master’s degree make an average of $113,940 per year. This field is also expected to experience substantial growth of 6 percent from 2022 to 2032.
Top paying states for economists are:
- District of Columbia: $151,850
- New York: $144,780
- Illinois: $141,460
- California: $137,090
- Massachusetts: $130,460
Working in the Economics sector is considered one of the most rewarding careers today, especially if you love understanding how societies allocate resources and create value.
A career in Economics is for you if:
- You want to combine mathematics and social theory in a very interesting way.
- You like to become part of solving issues like economic growth, social justice, economic efficiency, individual freedom, wealth and poverty, and power.
- You want a dynamic and fast-paced work environment.
A career in Economics is Not A Great Fit if:
- Math and statistics are not your strong suits.
- You don’t want to spend an additional two to six years on a graduate degree. The field values graduate students highly.
What is Financial Analysis?
Financial Analysis is the act of examining historical data within a company. It is used to gain information about a company’s current and future financial health to determine its strengths and weaknesses.
It entails implementing an internal control system for cash management, sales recognition, expense reimbursement, inventory value, and capital expenditure approval.
Knowledge of Financial Analysis is the most critical skill business managers, and entrepreneurs should have. This is very important in the decision-making process as it aids in identifying trends, evaluating a company’s financial health, and assessing its growth potential.
It also helps companies increase overall profitability, optimize resource allocation, and improve operational efficiency.
Financial Analysis: Education and Career Path
Graduates from various academic programs, such as accounting, Finance, and business, can become financial analysts. A specialization in a Master’s in Finance degree, Financial Analysis offers the most focused education.
That said, any appropriate bachelor’s program, including a focus on Risk Management, Portfolio Management, and Analysis Courses, should be beneficial.
The fundamental knowledge taught to students in Financial Analysis programs are its three methods:
- Horizontal analysis compares a business’s financial documents to the previous period, evaluating changes over time and determining whether numbers have increased or decreased.
- Vertical analysis examines a company’s finances by reviewing a single column of a financial document to understand the interaction of different numbers during a specific reporting period.
- Ratio analysis is a financial reporting technique that examines the correlation between various financial data, aiding professionals in understanding a company’s health and performance.
Work experience is the most significant factor in becoming an influential financial analyst. You can start to qualify as a junior financial analyst with only a bachelor’s degree. Should you decide to enhance your career prospects, pursue your master’s degree while keeping your career.
You can complete lifelong courses in graduate school to raise further your chances of climbing the corporate ladder!
If you don’t have a degree and want to start in Finance, you can look into voluntary work or internships and take a course that teaches you the Generally Accepted Accounting Principles (GAAP). The important thing is to focus on activities that enhance your skills in the following areas:
- Reading financial statements such as balance sheets, income, and cash flow statements.
- Calculating and understanding profitability, liquidity, leverage, and productivity ratios.
In most cases, financial analysts for large corporations must obtain a financial analyst certification. Here are some of the most notable certificates that require only a bachelor’s degree and relevant work experience:
Financial Analysis ROI: Education Cost and Salaries
According to NCES, the average cost of undergraduate degrees is $9,596 for in-state public schools and $34,041 for private schools. If you pursue a program in public school, you’re most likely to receive higher ROI since you’ll be paying lower tuition and fees and will have a pool of financial aid opportunities.
The average annual income of financial analysts who hold a bachelor’s degree is $95,080 and has an expected growth of 8 percent from 2022 to 2032. Financial analysts working in the Information Services industry are known to have higher wages, averaging $148,040 per year.
Top paying states for financial analysts are:
- New York: $140,880
- Wyoming: $129,420
- New Jersey: $127,090
- Alaska: $117,030
- California: $116,480
A career in Financial Analysis is for you if:
- You want to dedicate fewer years to a college degree.
- You want to have more geographical flexibility.
- You love analyzing financial data.
- You have strong problem-solving, logic, and excellent communication skills. Your job will require you to communicate financial terms to clients clearly and understandably.
A career in Financial Analysis is Not A Great Fit if:
- You want higher starting salaries.
- You don’t want to work in a stressful and competitive environment requiring long working hours.
- You don’t want to work in team-based roles where hierarchy plays a significant role.
Economists analyze and interpret macroeconomic trends, including buying and selling, and provide insights into the broader economic landscape. Financial analysts then incorporate the economist’s insight into their investment strategies to maximize profits and returns through good investments.
Similarly, financial analysts’ strategic initiatives can inform economists’ understanding of market behaviors and potential impacts on the economy as a whole.
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