Time Value of Money

Frequently abbreviated as TVM, the time value of money is the idea that money received now is worth more than an identical sum at a later date. It is a factor used when evaluating the opportunity costs of spending money rather than saving or investing it. The idea is that, in order to justify an allocation, investors must believe that they will see enough of a return down the road to justify their choice. That return must outweigh what you might miss out on by not spending the money and the impact of inflation on its value.