Understanding the Time Value of Money
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Unlock the secret behind money's true worth! Learn the Time Value of Money and why $100 today beats $100 next year. Essential finance insights for smarter de...
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Here’s why a hundred dollars today is worth more than a hundred dollars next year.
It’s called the Time Value of Money, and it’s one of the simplest ideas in finance.
First, money today can grow. If you invest a hundred dollars
at five percent, next year it becomes a hundred and five dollars. That’s called future
value — your money literally turns into more money over time. But it also works
the other way. If you need a hundred and five dollars next year, and the rate is
five percent, that’s only worth a hundred bucks today. That’s the present
value — we discount future money because it’s not as valuable now. And inflation makes
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