Investing Basics

What Is the Time Value of Money?

The time value of money is the principle that a sum of money is worth more now than the same sum in the future, because money available today can earn interest or returns. It underlies interest calculations, loan payments, and investment comparisons, and is expressed through present value and future value formulas.

Core Formulas

Future value: FV = PV × (1 + r)^n. Present value: PV = FV ÷ (1 + r)^n, where r is the rate per period and n the number of periods.

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🔗 Related Terms

Present Value Future Value Compound Interest Inflation

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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.