Time Value of Money
Financial glossary definition
Definition
The concept that money available today is worth more than the same amount in the future because it can be invested and earn returns. This principle underlies all financial calculations involving present and future values.
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Related Terms
Annual Percentage Yield (APY)
The effective annual rate of return on an investment or savings account, taking compound interest in…
Compound Interest
Interest calculated on both the initial principal and the accumulated interest from previous periods…
Interest Rate
The percentage charged by a lender for borrowing money, or the percentage earned on savings and inve…
Principal
The original amount of money invested or borrowed, before interest or returns. In a loan, principal …
Rule of 72
A quick formula to estimate how long it takes for an investment to double: divide 72 by the annual i…
Simple Interest
Interest calculated only on the original principal amount, not on accumulated interest. Simple inter…