Vanilla essence is a chemically manufactured flavoring, whereas vanilla extract is a natural product derived from vanilla beans. However, both are used in the same way during cooking. Vanilla extract costs more and has a richer, more distinctive flavor. Vanilla essence is less expensive but typically has a more artificial flavor.
Timing is not important when adding vanilla essence to a recipe or when using either product for baking cakes or cookies. However, when using vanilla extract for sauces or custards, it is generally best to add it after taking the sauce off the heat to preserve the flavor, as certain chemicals in the extract can break down.
Make vanilla extract at home by placing a slit lengthwise in each vanilla bean before placing it in a glass jar or bottle. Pour alcohol such as white rum or vodka into the container. Add enough alcohol to totally submerge the vanilla beans. Typically, 1 cup of alcohol is sufficient for seven vanilla beans. Put the lid on the jar or bottle and shake it. Shake at least once weekly for eight weeks. Once it is ready, the liquid should be amber colored. The quality of the vanilla beans determines the flavor and quality of the extract.