BSBA in Finance

Why is finance important to the economy?

From a macro perspective, finance is simply the practical application of economics.  The financial system is the means by which an economy allocates money to its highest valued use.  In English, it is how people, businesses, and governments raise the cash needed to conduct business. 

The goal of any financial system is to make sure that those with good ideas get the money necessary to implement the ideas.  How this is accomplished in a market-based economy is through the stock and bond markets.  This is one reason why double-majoring in Finance and Investment Management is a great idea.

Learn more about the Investment Management major »

In a market-based economy, investors invest in a firm and the firm takes the investment and uses it to implement the business ideas. In general, people do not give money without the expectation of getting something in return. If money is given, something is expected back in return and in this case, more money. 

The way to get the most money back is to invest in firms that will put the money to the best use. Of course others know this as well. As more invest with a firm the value of the firm's stock rises. In competition for more money, firms will strive to find better investments.  This leads to economic growth, more jobs, and hopefully a higher standard of living.

Why is finance important from a personal perspective?

Just like a company, we all need money.  We need money to live (food, clothing, shelter) and we probably want money for a great number of things (concert tickets, cars, computers, etc.). Finance helps us to have the money when we need it and even when we want it.

Obviously finance is important if we run our own firm.  Here we need to efficiently manage our resources and know what risks are worth taking.  Furthermore, we need to know how to invest and how to raise money. 

Even if you never plan on owning your own business, finance is still important to you.  Finance teaches us to understand the other side of every transaction.  If you understand what your employer wants, it is easier to achieve this; hence, you are in a better position for raises and promotions. 

That said, few people will now work their entire life at the same firm.  This can have dramatic financial implications.  Knowing in advance your financial position and options dramatically reduces your stress in this time of change.

Many people find themselves in financial ruin even though they may be extremely successful in their field.  For example, the news is constantly telling us of star athletes who have gone from making millions to being flat broke.  Most of these stories could have been avoided with some basic financial knowledge and financial discipline.

Retirement planning is one of the most cited reasons of why finance is important.  This is because it is so clear-cut.  You must invest for your retirement.  Knowing how can prevent needless challenges down the road.