This phrase is typically used to describe someone who loses their money quickly, either by being tricked or spending it wastefully.
There are plenty of things for a person to wisely spend their money on, wouldn't you agree? For example, setting aside cash for important needs like food, water, clothing and shelter would likely not be met with any criticism. On the other hand, if a person decided to risk their money by gambling it away, someone might describe that person by saying "a fool and his money are soon parted." When someone says this, it's usually to show that this person was or is being careless with how their handling their money.
Every year, millions of people lose money through means that would be considered by many to be foolish. Whether it's risking it at a casino, making wild investments, or being scammed by a dishonest person online, there are several ways for a "fool" to be parted from their cash.
Anyways, this phrase is over 450 years old! It has been around since at least the year 1557, as it was used by the poet Thomas Tusser. He wrote a poem called Five Hundred Points of Good Husbandry, and the expression can be found within:
"A foole and his money be soone at debate: which after with sorow repents him too late."
The wording is a bit different, but ultimately, it's similar to the saying we use today.
* I realized that I was the fool in the phrase 'a fool and his money are soon parted' after I shopped online and spent a hundred dollars on a new bike. I was sent a broken one and the seller refused to return my money!
Note: A phrase's origins are, much of the time, very uncertain. The origins you see listed are the more plausible theories that are floating around for how or where an expression came to be, but just remember, theories are not always fully accurate! The quotes which have the phrase in them are the oldest written forms of the phrase I could find, but thre's always a chance of an older recording being out there. Perhaps I've missed it. Feel free to let me know if you know of any!
Also, remember that just because you see an idiom in some old book or newspaper, let's say they're from the year 1893, well it doesn't mean the saying originates from that source. In all likelihood, if an expression is already in use in a book or newspaper, then it's probably older. Nevertheless, these old quotes serve as a way to show the reader how far back in history some of these sayings go, which can be quite interesting!