Business and Money Tips

(This is covered in lecture 22 of our course Financial Intelligence) The time value of money -- the idea that money received in the present is more valuable than the same sum in the future because of its potential to be invested and earn interest -- is one of the founding principles of Western finance. Let's say you lent your friend $2000. Would you rather he repaid you today, or tomorrow? The logical choice would be today, because you'll be able to use your money, and potential gains that come with it, sooner. What Is the Time Value of Money? Money is worth more more in the present than in the future because there's an  opportunity cost  to waiting for it. In addition to your loss of use if you don't get your hands on it right away, there's also  inflation  gradually eroding its value and purchasing power. If you're going to part with your money for any period of time, you probably expect a larger sum returned to you than you started ...