Time Value of Money

Time value of money is the concept that money presently earned has a greater value in future for the same amount. Money is deemed to have an earning capacity. Time value of money can also be described as the present discounted value. Compounding has an effect on the future value of money in the future. Discounting and compounding are tools used to know the value of money at different times. The term discounting refers to the computation of the present value of future sums of money.
I believed in the concept of saving money in a fixed account to avoid my weakness of extravagance. It hindered the chance for my money to grow. Money that is unutilized reduces its chance of earning capacity. Knowledge of time value for money would have helped me make a better decision rather than leave it lying unutilized. The concept of time value of money would have urged me to make an investment. My money would earn a higher value in the future. Tools of compounding would have helped me calculate my expected returns in the future. Interest for the money would have been earned.
I will dedicate part of my monthly income to saving. Savings accounts in banks are known to offer interest rates, which is a compensation for postponed consumption. I will execute a business idea by making investments. According to finance, investors prefer current money rather than earning it in the future so that they can generate more from the present value (Peterson & Fabozzi, 2009). It is preferable to have debts paid sooner than later to make an advantage of increasing the money capacity sooner.

Discount rates of money in the future can also be determined.
REFERENCES
Peterson, D. P., & Fabozzi, F. J. (2009). Foundations and applications of the time value of money. Hoboken, N.J: John Wiley & Sons.