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The idea that money available now is worth more than the same amount in the future due to its potential earning capacity.
In Depth
The Time Value of Money (TVM) is a core financial principle stating that a dollar today is more valuable than a dollar tomorrow. This is because money you have now can be invested and grow over time, earning interest or returns. Inflation also plays a role, as it reduces the purchasing power of money over time. Understanding TVM helps in making better financial decisions, from saving for retirement to evaluating investments.
Example
Because of the time value of money, receiving $1,000 today is better than receiving $1,000 a year from now, as you could invest the money and earn interest.