Time Value of Money (TVM)

Key Points

• The Time Value of Money refers to the opportunity cost of not putting your money to work. This concept highlights how a dollar invested today is worth more than tomorrow because of its earning potential at the present moment.
• This relates to the discount rate of inflation and interest rates. If your cash is sitting in a savings account, the value of that cash is being lowered by the discount rate.
• When investing, the money can earn a return above the inflation rate and increase in value over time.

Start Small. Earn in Time and Relax More Later!

So have you heard about how Your Dollar is Worth More Today? Likewise, you might be wondering how this is true and to be honest once explained it might make you want to start investing sooner rather than later. Regardless of the investment product(asset class), those hard earned dollars sitting in your dusty savings account are getting consumed by inflation.

Conclusion

Having savings is important for sure, but investing for your future is just as important. Those dollars are worth more today because of what is referred to as Time Value of Money (TVM).

Your idle cash has the ability to grow in value if you invest today(not literally today but at some point when you feel more comfortable) and increase your personal wealth as it moves forward with time. Yup! This is the most proven method for hedging against inflation. How? Well this is because of The Wonders of Compound Return.