The branches of finance
Finance is the study of money over time: how people, companies and governments get it, spend it, save it and protect it. It splits into a few big branches. Knowing which one you are looking at tells you what questions to ask.
The three main branches
π Personal finance
Your own money: budget, savings, loans, mortgage, pension, investing.
π’ Corporate finance
A company's money: where to invest, how to pay for it (debt or shares), how much to return to owners.
ποΈ Public finance
A government's money: taxes, spending, deficits and the debt it borrows.
π Personal finance
Questions every household faces: How much can I spend? How much should I save? Should I repay my loan early or invest? The tools are simple but powerful β compound interest, inflation, loans. Our calculators are personal-finance tools.
Example: saving 200 a month from age 25 at 7% a year gives roughly twice as much at 65 as starting the same savings at 35 β because of compounding (try it in the compound interest calculator).
π’ Corporate finance
Every company constantly answers three questions:
- Investment decision β which projects are worth doing? (a new factory, a new product, buying a competitor)
- Financing decision β pay with the company's own cash, borrow (bonds, bank loans), or sell new shares?
- Payout decision β keep the profit to reinvest, pay dividends, or buy back shares?
Example: Apple has spent hundreds of billions of dollars since 2012 buying back its own shares. That is a payout decision: it judged that returning cash to owners was better than keeping it. The three financial statements (from the three statement lessons) are where you see the results of these decisions.
ποΈ Public finance
Governments collect taxes and spend on pensions, health, schools, roads and defence. When they spend more than they collect, they run a deficit and borrow by selling government bonds. All the past deficits added up are the public debt.
Example: the Romanian Ministry of Finance sells Fidelis and Tezaur bonds directly to citizens to finance the budget deficit. The EU's rules ask member states to keep deficits below 3% of GDP and debt below 60% of GDP.
The specialised branches
| Branch | What it does | Real-world example |
|---|---|---|
| Banking | Takes deposits and lends them out; runs payments. Central banks issue the currency and set interest rates. | Commercial banks: JPMorgan Chase, Banca Transilvania. Central banks: the US Federal Reserve, the European Central Bank (ECB), Banca NaΘionalΔ a RomΓ’niei (BNR). |
| Investments & asset management | Invests other people's savings in stocks, bonds and other assets. | Pension funds, mutual funds and ETFs; Norway's sovereign wealth fund, one of the largest investors in the world. |
| Insurance | Pools risk: many people pay a small premium so the few who suffer a loss are paid. | Allianz, AXA. Warren Buffett's Berkshire Hathaway invests the premiums it holds before claims are paid (the "float"). |
| Financial markets | Places where stocks, bonds, currencies and commodities are bought and sold. | New York Stock Exchange, Nasdaq, the Bucharest Stock Exchange (BVB). See the next lesson. |
| Fintech | Financial services delivered through technology. | Revolut, PayPal, mobile banking apps, online brokers. |
| Behavioural finance | Studies why people make irrational money decisions (fear, greed, following the crowd). | Selling everything in a crash, then buying back after prices have recovered. |
How they connect
The financial system is a bridge: it moves money from people who have more than they need today to people and organisations who can put it to work β and pays the savers interest, dividends or growth in return.
Show the answer
The investment decision (build the factory) and the financing decision (pay for it with debt rather than with its own cash or new shares).