What is the Time Value of Money and why is it important?

In this post about the key investing principle called compounding, I mentioned the Time Value of Money.

The Time Value of Money is a concept and a tool used by financial planners to help investors understand that a dollar today is worth more than a dollar in the future.

This concept is used to help people make longer-term financial plans for life events like paying for a child's education, or planning for retirement.

Here's what Wikipedia says:

The time value of money refers to the observation that it is better to receive money sooner than later. Money you have today can be invested to earn a positive rate of return, producing more money tomorrow. Therefore, a dollar today is worth more than a dollar in the future.^[1]

Inflation also impacts the value of a dollar--what that dollar can buy today, is less than what the same dollar can buy a year from now, and so it's important to take that into account with our long term money goals.

If your money is invested properly, it is working hard to stay ahead of inflation.

And if it’s not, it’s basically losing value over time.

You work hard for your money! So it’s really important to learn how to take advantage of the time value of money, compounding, to get your money to start working as hard as you do.

The sooner you get started learning about investing, the more time is on your side

The goal of this website is to help first time investors set themselves up for success by taking all 12 steps of the MGB Investing Starter Kit, and getting going with investing, and thus benefitting from the time value of money.

How's it going for you? Do you feel like you are getting the best out of your time and money? Does the idea of compounding make sense to you? Let me know in the comments! and as always, thanks for reading this.

Quick links:

What is The MGB Investing Starter Kit? is HERE

Step 1 in the MGB Investing Starter Kit process is HERE

Step 2 is HERE --Keep a 'Digit Tally', like You Need A Budget or RocketMoney or our free tracker template HERE

Step 3 is HERE

What is Investing? is HERE

To buy our self-paced investing course for $49, sign up by clicking HERE.

For the 90 min zoom class during Black History Month for $98, click HERE.

To register for our 6 month course, for $795, click HERE.

Disclosures

Equity through equities.