Finance is an important part of our daily lives. We deal with money, savings, investments, loans, business budgets, bank accounts, and many other things. But have you ever wondered who is the Father of Finance? Who started the concepts we use today to manage money and make smart financial decisions?
In this simple and informative blog, we will understand:
- Who is called the Father of Finance
- Why some experts say there is more than one father
- What these great minds contributed
- Simple examples and calculations in dollars
- Why learning about them helps you understand finance better
Let’s explore everything step by step in very easy language.
What Exactly Is Finance?
Before choosing the “Father of Finance,” we must understand what finance includes.
Finance mainly deals with:
- Money management
- Investments
- Saving and spending decisions
- Risk and return
- Business finance and budgeting
- Financial markets like stock market and bond market
- Banking and lending
Finance has been developing for hundreds of years. So it is difficult to say that only one person created all financial ideas.
That is why experts say:
➡️ Finance does not have just one father. It has several important founders in different areas.
However, two names are most commonly used:
1. Luca Pacioli – Father of Accounting (Finance Foundation)
2. Harry Markowitz – Father of Modern Finance (Investment & Portfolio Theory)
Let’s understand both in detail.
Who Is The Father Of Finance?
⭐ Luca Pacioli – The Father of Accounting (Base of Finance)
Luca Pacioli was an Italian mathematician born in 1447. He introduced double-entry bookkeeping, which is still used in every business, every country, and every financial system.
Why is he important?
Because without proper accounting, finance cannot exist.
Finance depends on:
- Profits
- Losses
- Assets
- Liabilities
- Cash flow
- Balance sheets
- Budgeting
All these come from accounting.
What did Pacioli do?
In 1494, he wrote a book called Summa de Arithmetica.
This book explained:
- Debit and credit
- Journals
- Ledgers
- Trial balance
- How to record business transactions
This system is still used today — even after 500+ years!
✔️ Simple Accounting Example (in Dollars)
Imagine a small shopkeeper named Sam.
Transaction 1
Sam buys goods worth $500. He pays $200 cash, and the rest $300 on credit.
Accounting entry:
- Debit Inventory: $500
- Credit Cash: $200
- Credit Supplier Payable: $300
Two sides equal → $500 = $200 + $300
Transaction 2
Sam sells goods for $800 cash. His cost was $500.
Profit = Selling price – Cost price
Profit = $800 – $500 = $300
This simple profit calculation exists today because of Luca Pacioli’s accounting system.
➡️ This is why many people call him the “Father of Finance.”
⭐ Harry Markowitz – The Father of Modern Finance
Harry Markowitz (1927–2023) changed finance completely by explaining how to invest money safely and smartly.
He created the famous Modern Portfolio Theory (MPT).
What is Modern Portfolio Theory?
It explains:
- How to balance risk and return
- Why you should not invest all money in one asset
- How mixing different investments reduces loss
- How to choose the best portfolio (investment mix)
This is very important in stock market investing, mutual funds, retirement planning, and wealth building.
This is why Markowitz is called the Father of Modern Finance.
✔️ Simple Risk & Return Example (in Dollars)
Let’s say you want to invest $10,000.
You have two options:
Option A (Safe Investment)
- Expected return: 5%
- Risk (standard deviation): 4%
Option B (Risky Investment)
- Expected return: 12%
- Risk: 15%
If you invest all $10,000 in Option B, you may earn more, but you also face high risk.
Markowitz suggested mixing investments.
✔️ Example: 50/50 Portfolio
- $5,000 in Option A
- $5,000 in Option B
Expected Return
= (0.5 × 5%) + (0.5 × 12%)
= 2.5% + 6%
= 8.5%
Return in dollars
= 8.5% of $10,000
= $850 profit
Risk
Because the two options are not perfectly correlated,
the risk reduces — maybe from 15% to around 9%.
➡️ You get good return with less risk.
This is the power of Modern Portfolio Theory.
✔️ Example: 70/30 Portfolio (Higher Return)
- $7,000 in Option B (high return)
- $3,000 in Option A (safe asset)
Expected Return
= (0.7 × 12%) + (0.3 × 5%)
= 8.4% + 1.5%
= 9.9%
In dollars
= 9.9% of $10,000 = $990 profit
Risk is higher than the 50/50 mix, but lower than investing 100% in the risky asset.
➡️ You can adjust the mix based on your goal and risk tolerance.
This is why Markowitz is the Father of Modern Finance.
Other Important Contributors to Finance
Even though two major names stand out, finance developed because of many thinkers.
| Name | Contribution |
| Adam Smith | Father of Economics, explained free markets |
| David Hume | Early theories of money & banking |
| William Sharpe | Capital Asset Pricing Model (CAPM) |
| Eugene Fama | Efficient Market Hypothesis (EMH) |
| John Burr Williams | Dividend discount model |
These thinkers expanded:
- investment theory
- market behaviour
- corporate finance
- financial risk understanding
Why Finance Needs More Than One Father
Finance has three main parts:
1. Accounting (records, profits, costs)
Before you invest, you must know:
- how much you earn
- how much you owe
- how much profit you made
→ Luca Pacioli contributes here.
2. Economics (markets, prices, behavior)
Understanding how money moves in society.
→ Adam Smith, David Hume helped here.
3. Modern Investing (risk, return, diversification)
Choosing best investment strategies.
→ Harry Markowitz, Sharpe, Fama helped here.
This is why finance does not have just one founder.
Who Should Be Considered the Father of Finance?
Most experts say:
👉 Luca Pacioli is the Father of Finance Foundations
(He created the system that makes finance possible.)
👉 Harry Markowitz is the Father of Modern Finance
(He created the theories that guide investing today.)
Both are correct — depending on how you define finance.
Practical Application for Students and Beginners
Understanding these pioneers helps you:
✔️ Make better investment choices
Because you understand risk vs return.
✔️ Maintain good financial records
Because accounting is the base of finance.
✔️ Build long-term wealth
By using portfolio strategies (mixing safe & risky assets).
Real-Life Investment Example
Let’s say you have $20,000.
You want to grow your money but don’t want to take big risks.
Option 1: All in Safe Asset (5%)
Earnings = 5% of 20,000 = $1,000
Option 2: All in Risky Asset (12%)
Earnings = 12% of 20,000 = $2,400
But risk is too high.
Option 3: Mix (Balanced Portfolio)
- $10,000 in safe asset
- $10,000 in risky asset
Expected return = (0.5 × 5%) + (0.5 × 12%)
= 8.5%
Earnings = 8.5% of $20,000
= $1,700
➡️ More than safe, less risky than full risky investment.
This is exactly what Markowitz taught the world.
Also Read: What Is the Meaning of Finance?
Final Conclusion
Finance is a large field that developed over many centuries. That is why it does not have just one father. But two names stand out clearly:
⭐ Luca Pacioli – Father of Accounting and Foundations of Finance
He developed double-entry bookkeeping, which is still the base of all finance systems.
⭐ Harry Markowitz – Father of Modern Finance
He introduced Modern Portfolio Theory, which guides investing, portfolio construction, and risk-return analysis.
Both made contributions that changed the world.
Their ideas help every investor, business owner, student, and professional manage money better.
Understanding their work helps you:
- take better financial decisions
- calculate profits and risks
- invest wisely
- build wealth safely
These great thinkers shaped the financial world we live in today.
