Sparks Commentary: What college majors are best for entering the finance field?

“The most powerful force in the universe is compound interest.”

– The greatest Albert Einstein quote that Albert Einstein (most likely) never said

The short answer is that there are five college majors that are particularly helpful for going into finance. These are: mathematics, statistics, economics, accounting, and (of course) finance.

Benjamin Graham, whom some consider to be “the father of investing”

Mathematics

A math major is among the most helpful preparations for a financial professional. I personally believe that no financial professional can take too much math. Many business programs require some calculus classes – but even if yours doesn’t, you might consider taking a calculus class or two. A good rule of thumb is to take as much math as you can stand. You might not use all of it (I admit this freely), but it may actually stretch your math skills to the point where every-day financial math becomes significantly easier.

A tangent line to a curve in calculus

As a personal anecdote on this subject, I was planning to transfer to a business program with particularly heavy math requirements. But this changed when I barely passed Calculus & Analytic Geometry II, getting through that class by the skin of my teeth. It was the hardest math class that I ever took – so hard, that I actually transferred to another business school where the math requirements were somewhat less. When I got there, it turned out that I had taken far more math classes than (virtually) anyone else. This was actually quite nice, because it meant that the math that I was then learning was significantly easier for me. After Calc II, my finance classes seemed to me to be a piece of cake; and didn’t challenge my math skills at all.

Area under the curve in calculus

Statistics

Few things will help a financial professional like a good background in statistics. Even if you don’t major in it, consider taking some statistics classes during your college career. Statistics is actually offered as a concentration within a larger math major, with calculus classes as prerequisites for some of the more advanced statistics classes. But more often, business majors get their statistics classes from the economics department, rather than the math department. Economics departments typically offer classes in business & economic statistics, which business and economics majors are often required to take. Most business schools will only require you to take one of these classes, but you might consider taking more than the minimum requirement, with the versions from the economics department often being easier than those from the math department (as well as somewhat more applied).

Snake eyes from rolling dice

I took an extra statistics class from the economics department – a class called “Economic & Business Forecasting.” It actually turned out that it was more of an “econometrics” course, but it was still very useful to me. It helped me to learn much more about regression analysis, or finding a mathematical model of best fit for a particular set of data. This is often an easier alternative than taking a calculus-based statistics class, so people interested in finance might consider taking classes from the economics department in statistics.

A bell curve from rolling three dice, showing outcomes from 3 (triple 1's) to 18 (triple 6's)

Economics

Economics is another excellent choice for going into the financial field. It teaches you much about the external environment of the business. Besides the business & economic statistics classes, business programs will often require their students to take at least two basic economics classes. One is called “micro-economics,” and the other is called “macro-economics.” Micro-economics will teach you the basics of supply and demand theory (which is useful for pricing), and macro-economics will teach you much about the broader economy as a whole. An extension of macro-economics is a “money and banking” class (also known as “monetary and financial economics”). Few business schools will require all of their business graduates to take it, but a number of them will require their finance majors to take it. It can also be applied to the requirements of an economics major as an elective towards the degree.

Supply and demand curves

I also took an international economics class, which can be very useful for this. This subject includes international finance, a subfield of international economics that is often required for finance majors. It is essentially a kind of economics class, and is partially focused on exchange rates. Knowing about exchange rates can be very useful for international business, as you might expect, but it’s also quite useful for domestic business. It’s nearly impossible to escape international influence in this world, even if you just stay in one place. Consider taking some economics classes, if you want to go into the financial field.

Euro banknotes

Accounting

Accounting is another fabulous choice for going into the financial field. It’s almost impossible to get a business degree these days, without at least a semester or two of accounting. Even if you’re majoring in something else, taking some principles of accounting classes would not hurt you if you're going into the financial field. These classes will teach you about how financial statements are prepared, and prepare you for interpreting them. How healthy is your own company financially? How healthy are your competitors financially? At least part of the answer for this will come from reading their financial statements, and those of your own company as well (which is the most important part).

Early 19th-century ledger, used for accounting

In addition to the principles of accounting classes, I also took a finance class called “Financial Analysis and Working Capital Management.” The “financial analysis” portion was focused entirely on the analysis of financial statements. It might have been the most useful finance class that I ever took, and was all of the things that I liked about my principles of accounting classes. I won’t say that it wasn’t hard, but it was certainly worth it, and taught me how to think about financial data.

Historical financial statements

Finance

Not surprisingly, a finance major may be the most common preparation for a financial professional. It combines the insights of all of these other classes, including the math and statistics classes. In that respect, it is a classic “interdisciplinary field.” Accounting provides a good window into the internal situation of the company (and one’s competitors), while economics provides a good window into the external environment of the broader economy. A financial management class combines all of these things together, and teaches you how to think about managing money of all kinds. Just as an accounting major is designed primarily to help people to become accountants, a finance major is designed primarily to help people to become financial managers.

But it’s useful for other things, too, as is the accounting major. Just as accounting majors can help people to become auditors, finance majors can help people to become financial analysts. But most of the focus will be on how to manage money – both your own, and that of others. Even if your job is somewhere else in the private sector, this is a useful background to have for many things in the business world. Besides the standard “financial management” class, you might also have to take a class or two about investments. These classes are useful additions to the standard business major, and will teach you much about managing money.

A graphing calculator’s “TVM Solver” screen, with “TVM” standing for “Time Value of Money”

Closing thoughts

If you’re planning on going beyond the bachelor’s degree, you might be able to combine these degrees together in some very special ways if you know what you're doing. It turns out that some decide to get their bachelor’s degree in mathematics, statistics, or economics; and then get their master’s degree in business, with a concentration in accounting or finance. This is one of a number of good approaches. It’s often easier to get yourself admitted into a Master’s of Business Administration program with a major other than business, and mathematics and statistics majors are particularly prized (while economics and business are not prized as much). It might also be helpful to take a class or two in accounting to complement this before then. But this is a good career path to consider for those wanting a master’s degree in the subject, if they can handle the intense math that this kind of bachelor’s degree requires.

New York Stock Exchange

If you’d rather enter the finance field with just a bachelor’s degree – and I can certainly understand this, since I only have a bachelor’s degree in business – you would probably be better off to just major in business. This could include a concentration in accounting, economics, or finance (or even something else entirely). If you go this route, some extra statistics classes from the economics department probably would not hurt, since they’re often easier than their counterparts in the math department (as mentioned earlier). Finance is probably the most standard major for those entering the field with only a bachelor’s degree, but any of these undergraduate majors would help you tremendously, and would prepare you for many other things as well. If you major in one of them, consider minoring (or even double majoring) in another of these subjects. You might find that these subjects combine well together, and may lead to a good job in the private sector.

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