Imagine this.
You’re 18, flat broke, standing outside your college canteen with exactly ₹100 in your wallet. Your friend Rahul comes up and says, “Bro, lend me this hundred bucks, I’ll return it next year. Promise.”
Now pause.
You could give him the money, and a year later, Rahul gives you back ₹100. Simple, right?
But here’s the bigger picture: If instead, you had kept that ₹100 and bought 10 packets of Maggi today, by next year the price of each might go up. Or—what if you had put it in a small savings account and earned interest?
That ₹100 wouldn’t just be ₹100 anymore. That’s the Time Value of Money in action.
What Is Time Value of Money (TVM)?
At its core, Time Value of Money is the idea that a rupee today is worth more than a rupee tomorrow. Why? Because of its potential to earn.
Let’s break it down simply:
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You can invest today’s money
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You can spend it before inflation eats it up
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You can save it and earn interest
In short, money has earning potential, and the longer you sit on it, the more powerful it becomes—like a good cup of chai that brews longer.
The ₹100 Story: Now or Later?
Say you have two options:
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Take ₹100 today
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Get ₹100 a year from now
Which one’s better?
The ₹100 today. Why? Because you could put it in a fixed deposit at 6% interest. After a year, it becomes ₹106.
Meanwhile, if you wait a year for Rahul to give it back, you’re missing out on that ₹6.
That ₹6 is your opportunity cost—what you lose by not using your money wisely.
How Time Eats Your Money (Inflation’s Dirty Game)
Let’s say you bury ₹100 under your mattress today (you rebel, you). A year later, you pull it out. It’s still ₹100, sure—but can it buy what it could last year?
Nope.
Inflation has quietly been eroding its power. That’s like a thief in slow motion, stealing your purchasing power bit by bit.
This is why investing is important. Because doing nothing with your money is not the same as doing the right thing with it.
Where This Shows Up in Real Life
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Loans: You repay more in future money, which is worth less.
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Investments: Returns are higher when you start early.
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Pensions: ₹10 lakh 30 years from now ≠ ₹10 lakh today.
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EMIs: What seems manageable now might crush your future budget.
It’s not just theory—it’s everywhere in adulting.
The Magic of Compounding
Now here’s the part they should teach in school (but don’t):
Let’s say you invest ₹1,000 today at 10% annual interest. After a year, you have ₹1,100.
Next year, you earn 10% not on ₹1,000, but on ₹1,100. That’s ₹1,210.
This snowball is called compounding—and it’s the best friend of the Time Value of Money.
A Quick Formula (Don’t Worry, It’s Friendly)
If you ever want to calculate how much your money can grow:
Future Value (FV) = PV × (1 + r)^n
Where:
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PV = Present Value (today’s money)
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r = interest rate
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n = number of years
That’s it. Plug and play.
So ₹1,000 at 10% for 3 years =
= ₹1,000 × (1.1)^3 = ₹1,331
That’s ₹331 earned just for showing up and letting time do its thing.
Final Thoughts: Time Is Money
Next time someone asks for ₹100 and says, “I’ll give it back later,” you’ll smile and say, “With interest, bro.” 😉
Understanding the Time Value of Money isn’t just a finance hack—it’s a life hack. It helps you plan better, invest smarter, and avoid rookie money mistakes.
FAQs
Q1. Why is money worth more today than in the future?
Because it can be invested, spent, or saved to grow—while future money loses value due to inflation.
Q2. How does inflation affect the Time Value of Money?
Inflation reduces purchasing power over time, making today’s money more valuable than tomorrow’s.
Q3. Where is TVM used in real life?
TVM is used in investing, loan repayment, retirement planning, business valuations—basically, in every smart money decision.
Q4. What if I just save money without investing?
Your money will lose value over time. You may feel safe, but you’re silently losing purchasing power.
Q5. What’s the easiest way to start benefiting from TVM?
Start early. Even a basic savings account with interest is a good start. Then graduate to SIPs, FDs, or mutual funds.
