The time value of money means that a dollar you have now is worth more than a dollar you will receive in the future. This is because you can invest that dollar now and potentially earn interest or returns on it. For example, if you invest $1,000 today at an annual interest rate of 5%, after one year, you would have $1,050. In contrast, if you waited a year to receive that same $1,000, you would miss out on the $50 you could have earned. Understanding this concept helps you appreciate the benefits of investing early and consistently.

The time value of money is a financial principle that states money available today is worth more than the same amount in the future due to its potential earning capacity. This core concept is fundamental in finance and investing, as it emphasizes the importance of receiving cash sooner rather than later in order to take advantage of investment opportunities and the compounding effect of interest.