Personal Finance Basics: The Time Value of Money

Welcome to your quick finance wake-up call!

You’re a freshman, maybe thinking: ‘I’ve got no money now, why worry about finance yet?’ Wrong move.

Today’s lesson: the Time Value of Money.

It’s the #1 concept that separates broke grads from wealthy ones.

A simple truth: a dollar today is worth more than a dollar tomorrow. Why? Because money now can earn interest, grow, compound, you see  time is your superpower.

Quick example, read closely:

Imagine you stash just $100 today in a safe spot earning 7% a year; which is a realistic long-term stock market average.

In 10 years? That $100 becomes about $197.

In 30 years? Over $760. In 50 years? Around $3,000+ from a single $100 investment.

Remember the S&P 500 was trading around $500 in 1995, $1,200 in 2005 and nearly $6,800 today.

However,  if you wait 10 years to invest that same $100?  You miss out on all that growth. 

Inflation literally eats your money over time if you do nothing, and rewards you for investing and holding assets that will appreciate over time.

So my tip is to start now, right away, depositing even $25 a month and letting compounding do the heavy lifting, your future self will thank you!