A dollar today is worth more than a dollar tomorrow. This is the time value of money (TVM) — the foundational concept of all finance. Why? Because a dollar today can be invested to generate returns. A dollar received in one year has lost that year of potential growth.

This concept explains why: lenders charge interest (compensation for giving up the use of their money), investors demand returns (the opportunity cost of capital), inflation matters (future dollars buy less), and early investing dramatically outperforms late investing (compounding time is the most powerful variable).

Present value: what a future sum is worth today, discounted by the rate of return you could earn. $1,000 received in 10 years at a 7% discount rate is worth approximately $508 today. If someone offers you "$1,000 in 10 years or $600 today," the $600 today is the better deal at any expected return above ~5.2%.

Future value: what a present sum will be worth in the future, given an expected return. $10,000 invested at 8% for 30 years becomes approximately $100,627. The initial $10,000 contributed ~10% of the final value. Time + compounding contributed ~90%.

The Rule of 72: divide 72 by the annual return rate to estimate how many years it takes to double your money. At 7%: 72/7 ≈ 10.3 years. At 10%: 72/10 ≈ 7.2 years. At 2% (savings account): 72/2 = 36 years. This simple mental math tool makes the cost of low-return savings immediately visceral.