Time value of money (TVM)

Meaning:

The Time Value of Money (TVM) is a financial idea that says money today is  more valuable than the same amount of money in the future. This is because money can  grow through interest or investment.

Example: 

For instance, if you invest ₹10,000 today at an 8% interest rate, it will become  ₹10,800 next year, showing that money can grow over time.

How to Understand: 

TVM is based on a few key ideas:

•Money earns interest, which means it can grow.

•Money can lose value because of inflation, which makes things more expensive.

•Money can be invested to create even more money.

So, if you wait to use your money, it becomes less valuable over time.

Importance:

Understanding TVM helps you make smart investment choices.

It is essential for calculating loan payments, returns from investments, and the amount you get back from fixed deposits.

TVM is used in financial planning, business valuation, and budgeting.

It helps you compare how much future earnings are worth compared to money you have today.

Learning about TVM encourages saving and investing early.