Time Value of Money(TVM) is a mathematical concept that determines the value of money, at a point or over a period of time, at a rate of given interest. The Value of Money Changes Over Time…
The reason why you need to have an understanding of Time value of money before you begin developing your investment strategy, is that it will help you understand exactly how much you should be making, in what period of time, in order to reach a specific financial goals. As I'll talk about later, you can't just wish to make your money without a specific plan and understanding of your ability to take risk. You can not make your money work for you, if you don't have an understanding of this.
Have you ever wondered... If you save $$$ in my investing account every year, how much will I have when I retire?
If I want to pay for my children’s college, how much should I save every year?
If I borrow money to buy a private jet, a house or a car, how much is my monthly payment?
Should I invest in this piece of equipment for my business?
If I want to retire early, how much in additional principal payments would be required?
How much should you invest today in order to reach a goal of a house down-payment in 3 years?
Time value of money helps you calculate the exact amount of money you should be investing, saving and making in order to meet your financial goals.