Definition

The time value of money is the idea that money available now is worth more than the same amount later, because it can earn returns in the meantime. It underpins nearly every financial calculation, from comparing loan offers to deciding whether to take a lump sum or payments. It is the reason starting to invest early is so powerful.

1. Compound Interest

   Earning returns on both your original money and on the returns it has already produced.
2. Inflation

   The gradual rise in prices that erodes the purchasing power of money over time.
3. 4% Rule

   A guideline that withdrawing about 4% of a portfolio in year one is likely to last 30 years.