Time value of money - when to invest

Understand the Time Value of Money

The most basic law in finance! The time value of money states that a dollar today is worth more than a dollar at some time in the future. Okay, it?s not that simple to understand at first glance so let me delve into this advice a little with some financial examples:

If I invest $1,000 in a 5% savings account today, it will be worth $1,050 in one year. Therefore, if I can have $1,000 today or choose to have $1,000 one year from now, it is always better to have the money now. By saving and investing today, you make the time value of money work for you.

Let?s look at the reverse of this, to see how the time value of money can work against you. Suppose instead of receiving $1,000 that you spent $1,000 by purchasing merchandise on your credit card. Remember that a dollar today is worth more than a dollar tomorrow, so in this case, you will have lost money because you will need to pay off your credit card account with money from the future (which is worth less than money today). In addition to having to pay with future money, you will also have to pay interest expense. So, in this case, if you paid off the credit card in one year (assuming 15% interest), you?d have to pay $1,150.

You should think about the time value of money before making any decisions. Another, maybe even more important concept related to the time value of money is the compounding effect of money.

You make good points, but alot of that is with inflation.. Now the dollar is worth less in the usa.. No one a decade ago could have even imagined this would happen...

Yes. In my country. In 7 years. You will earn double in your account bank. If you put $1 in your bank. So, in 7 years. You will get $2. So, if you save 2 million in your bank, so. After 7 years, you will get 4 million is your bank. Its good or not?

Well, as I live in India, i have realized it that as time goes on, the value of money goes on decreasing, I mean to say that previously, when I earn $1 from the internet, then I used to get Rs 45 in Indian money but now, I get just Rs 40.

titaniumhijau,

You said:

"Yes. In my country. In 7 years. You will earn double in your account bank. If you put $1 in your bank. So, in 7 years. You will get $2. So, if you save 2 million in your bank, so. After 7 years, you will get 4 million is your bank. Its good or not?"

According to your figures, it appears interest rates are quite high for both savers and borrowers. As long as you remain a saver, you will be doing very well. But, should you become a borrower, you are in deep financial trouble.

Keep saving! 

Thats a true statement, the money which we are saving should be allowed to work well. And by making our money work gives us lots of gain through the saving. We should be very much clear about the investment we are making, like share, mutual funds or bank deposits and many other way is been adopted nowadays and surely it will be a developing process for our life.