Difference Between Money, Finance & Funds (2024)


Summary: The terms finance, fund, and money are often used interchangeably but they have differing connotations. Read on to find out how finance, fund & money differ.

Difference Between Money, Finance & Funds (1)

Usually, people use the terms money, finance, and fund interchangeably, thinking of them as synonyms. However, they are quite different. Read on to find out what is finance, what is money, and what is fund. Also, learn about money vs finance and funding vs financing.

What is money?

Money is what you work for every day. Waking up early by sacrificing your sleep, battling traffic jams, toiling at a desk, and coming home late is essentially all for the sake of making money. But what if someone asks you to describe money? Here’s what you can say:

Essentially, money is a commodity people accept as payment for goods and services or repayment of debts. With a store of value, money includes cash and cash equivalents like treasury bills, commercial paper, certificates of deposit, etc. Cash equivalents are highly liquid instruments that you can readily convert into cash. Money is a medium of exchange, a unit of account, a store of value, and a standard for deferred payments.

What are funds?

A fund refers to an amount of money kept aside for financial goals such as buying an asset, planning for retirement, or tiding over an emergency. Think of it as an amount you keep aside or invest for your next vacation, a new phone, or even a luxury handbag.As part of financial planning, the investment is usually made under professional management.

Businesses, governments, and individuals use funds to fulfil their financial goals. If invested, funds help you earn interest or dividends. A fund can be an insurance fund, exchange-traded fund, pension fund, mutual fund, etc. Mutual fund schemes can offer financial security, tax savings, etc., that help you fulfil your dreams.For instance, with IDFC FIRST Bank, you can invest in mutual funds of your choice and create wealth for your financial goals.


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What is finance?

Imagine if you were looking to start a business. The first thing you need (besides a brilliant idea) is finance. Finance refers to the process of raising capital. It is a broad concept that involves the creation, management, and study of money. Savers and investors accumulate funds to earn dividends or interest. These funds can then be channelised to businesses, governments, etc., who borrow at a specific interest rate.

Insurance firms, commercial banks, Non-Banking Financial Companies (NBFCs), investment companies, etc., can help channelise funds from investors to borrowers. Finance activities can include stock investment, loans, savings, etc. Also, finance by itself could refer to business finance, public finance, or personal finance.

Money vs finance

Money is a part of finance.Finance is a broader concept that includes the management, creation, and study of money.
The money includes cash and cash equivalents that are readily available for use.Finance includes personal, public, and corporate finance.

Fund vs finance

A fund involves a set amount of money kept aside for specific financial goals such as retirement, higher education, or a wedding in the family.Finance involves building or raising money. It also involves the repayment of the principal sum along with regular interest payments.

Funding vs financing

Funding is the act of injecting money towards a specific financial goal without the need for repayment.Financing is the lending or borrowing of a sum of money that requires repayment with an interest rate.
It may be granted to businesses by investors,banks and governments.Financing is offered by venture capitalists, banks, shareholders, etc.


Businesses, governments and individuals need capital for multiple needs, but the source of capital can vary. It may involve money/cash equivalents, funds, or finance. The terms may seem similar, but it is essential to understand the difference between them. Once you know this, you can use them correctly and also understand the context clearly.


The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circ*mstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirstbank.com for latest updates.

Difference Between Money, Finance & Funds (2024)


Difference Between Money, Finance & Funds? ›

A fund involves a set amount of money kept aside for specific financial goals such as retirement, higher education, or a wedding in the family. Finance involves building or raising money. It also involves the repayment of the principal sum along with regular interest payments.

What is the difference between money fund and finance? ›

But are they? When it comes to infrastructure investment, these are two separate concepts. Financing is defined as the act of obtaining or furnishing money or capital for a purchase or enterprise. Funding is defined as money provided, especially by an organization or government, for a particular purpose.

What is the difference between financing and funds? ›

“Funding” refers to the stream of public agency revenue that pays for or offsets the cost of an asset or service or supports repayment of debt that finances the asset. In contrast, “financing” refers to the method of paying for an asset or service, including debt financing.

Is funds and money the same thing? ›

A fund is a collection of different people's money, collected & managed by high market professionals. They accumulated and invested the money in various stocks, bonds, and other securities to provide better returns.

What is the meaning of finance money? ›

Finance is defined as the management of money and includes activities such as investing, borrowing, lending, budgeting, saving, and forecasting.

Are money market funds safe in a recession? ›

Money market funds can protect your assets during a recession, but only as a temporary fix and not for long-term growth. In times of economic uncertainty, money market funds offer liquidity for cash reserves that can help you build your portfolio.

How safe are money market funds? ›

How safe are money market funds? There is little risk associated with money market funds. The U.S. Securities and Exchange Commission (SEC) mandates that only the highest-credit-rated securities are available in money market funds.

Is funding part of finance? ›

Recently, I have noticed the term finance is growing more synonymous with the term funding than is responsible. Finance represents value relative to risk, while funding is simply an injection of capital. To confuse these two terms could be to subordinate value to the funding.

Why is financing and funding important? ›

Financing and budgeting are crucial aspects of starting and running a successful business. Securing funding, creating a budget, and managing expenses and profits are all essential elements of financial management that will help ensure the success of your startup venture.

What is the difference between fund accounting and financial accounting? ›

Fund accounting separates financial resources into distinct funds, allowing for both individual financial statements for each restricted fund and financial statements for the organization overall. Traditional accounting typically combines all resources into a single financial statement for the company overall.

How do funds make money? ›

Investors in the mutual fund may make a profit in three ways: The fund may earn interest and dividend payments from its holdings. The fund may earn capital gains from selling assets held in the fund at a profit. The fund may appreciate, meaning each fund share will grow in value over time.

Why is it called money? ›

The word money derives from the Latin word moneta with the meaning "coin" via French monnaie. The Latin word is believed to originate from a temple of Juno, on Capitoline, one of Rome's seven hills. In the ancient world, Juno was often associated with money.

What is the legal definition of funds? ›

1 : a sum of money or other resources whose principal or interest is set aside for a specific objective.

What are the functions of money finance? ›

To summarize, money has taken many forms through the ages, but money consistently has three functions: store of value, unit of account, and medium of exchange.

Is finance related to money? ›

Finance is concerned with the art and science of managing money. The finance discipline considers how business firms raise, spend, and invest money and how individuals divide their limited financial resources to achieve personal and family goals.

What is finance in simple terms? ›

Finance, of financing, is the process of raising funds or capital for any kind of expenditure. It is the process of channeling various funds in the form of credit, loans, or invested capital to those economic entities that most need them or can put them to the most productive use.

Is money part of finance? ›

Key Takeaways. Finance encompasses banking, leverage or debt, credit, capital markets, money, investments, and the creation and oversight of financial systems. Basic financial concepts are based on microeconomic and macroeconomic theories.

Is finance related to money or money management? ›

Finance is the study and discipline of money, currency and capital assets. It is related to but distinct from economics, which is the study of the production, distribution, and consumption of goods and services.

What is the difference between a money fund and a savings account? ›

Many traditional savings accounts offer nominal interest rates, with some exceptions. You may find that money market funds or MMAs offer higher returns. Unlike savings accounts, many money market funds and accounts also let you write checks.


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