Outline of finance

Ever wondered why money today is worth more than tomorrow's money?

Imagine you have $100 today and you can either spend it now or invest it to earn interest. You want to know which option gives you more value in the long run.

Think of $100 as a seed that can grow into more money over time. The sooner you plant it, the sooner it can sprout and produce more seeds. That's why money available now is more valuable.

Example

If you invest 100 at 5% interest, after one year you'll have 105. If you wait a year, you'll have 100. So, investing the 100 sooner gives you more money in the future.

Remember this

Money today is worth more because it can earn interest or be invested, growing into more money over time.

Text adapted from Wikipedia, licensed under CC BY-SA 4.0.

Related concepts

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NPV = Present Value of Future Cash Flows

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Educational content, not financial advice.

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