Holicent
VIP Contributor
The time value of money is a concept that describes the fact that money has value not because it can be used to buy goods and services, but because it can be exchanged for more money at a later date. For example, when you spend $100 today and then exchange it for $100 two years from now, the first $100 no longer has any value and you'll only have $50 left. The second $100 still has some value, but less than before (in this case) because it's worth less than the first $100.
The time value of money is important because it allows people to make decisions based on future consequences rather than present ones. For example: if someone had $100 today and needed to buy something today but didn't have enough money in their account yet, they could choose not to buy anything at all (because they'd get paid tomorrow anyway). But if someone who didn't have enough money yet decided that they wanted to buy something for tomorrow but couldn't afford it today—they might choose not to buy anything at all now either.
The time value of money is important because it allows people to make decisions based on future consequences rather than present ones. For example: if someone had $100 today and needed to buy something today but didn't have enough money in their account yet, they could choose not to buy anything at all (because they'd get paid tomorrow anyway). But if someone who didn't have enough money yet decided that they wanted to buy something for tomorrow but couldn't afford it today—they might choose not to buy anything at all now either.
