From history, it has repeatedly been proven that time has an effect of the value of money. It is amazing what $10,000 will amount to in three years if you calculate it with the time value calculator. It accumulates in a way that will make you not regret leaving $10,000 for that period of time; which brings to mind what have been said about saving culture. If you the opportunity to get $10,000 today or to leave it in a savings account for a period of three years, what will you do? A whole lot of people will want to have the money today, and not in three years time; that is a long time to wait, isn’t it? There are just a lot of things you can do with this money in your hands right now. But if you delay your gratifications, and go ahead to leave the money for three years, time, and every odd you can think about, will be in your favor.
Anyways, if you will not put the money into a savings account or some sort of investment, then it is better to take the money now. According to the time value theory, the value of $20 bill today will not be the same tomorrow. This is as a result of factors like inflation, recession, and all that stuff. There is simply no way an inactive $20 of today will be worth the same thing in three years time or so.
CALCULATING THE TIME VALUE OF MONEY:
There are ways to do this manually, but there are software applications too that have been developed for the purpose of calculating the time value of money. With the time value of money calculator, one can find the present and future values of
- A future value amount
- Cash flows
There is no two ways about the fact that money left without being invested looses value with time. Putting off a project in the future will cost more than what it would have cost had the project been executed now. This is why even banks will pay you small interest rates at the end of the month depending on the amount of money you have in your account. It is simply not possible for money to have the same value today and in three years time.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.