Financial Terms / S - T / Time value of money

Time value of money

In simple terms, the time value of money is the concept that money today is worth more than money tomorrow or at any point in the future. $1 earned today is not the same as $1 earned some time in the future.

Inflation reduces the value of the same amount of money over time. If you earn $1 today, you can invest the funds into risk-free (treasuries) or riskier assets (bonds, stocks) to get a positive return on your investment over time.