The time value of money concept is fundamental to all financial transactions and is a key precept in the discount buy. Capitalizing on this concept is the easiest way to make money. Using this financial concept can change your current economic picture and give you a bright financial retirement future.

For example, the easiest example of the time value concept is by comparing the present value of a dollar o the future point which can be six months, two years or even twenty years.

The concept bases itself on the idea that the value of a dollar today is much more valuable than the same received at a point of time in the future. It bases itself on the current inflationary trends that dominate the world economic scenario today. In the face of such continued trends the value of the dollar is bound to take a drop. The theory blames the cause of such inflation on the spendthrift tendencies of the government. In the larger picture the issue of inflation gains a larger significance with the increasing amounts of time and money that get involved.

ENSURE A SAFE RETIREMENT WITH BUYING DISCOUNT

The following chart shows the future value of $1000 at different inflation rates over time.

Compound Interest We can use the same principle of the time value of money to work for us to counter inflation. We do this through earning interest on our money at a higher rate than the inflation rate. This principle works the same way when you use it to make your money grow, and is the easiest way to make money.

The concept of growing money is called compounding. You take a certain amount of money, invest it, earn a return on the investment, and then reinvest your initial investment amount and earnings over a period of time. You keep turning the money over and as this base amount grows, so does the amount it earns in interest. This is illustrated in the following chart.

Year Amount Interest Total Value of Invested Earned Investment

1 $1,000.00 $50.00 = $1050.00

2 $1,050.00 $52.50 = $1102.50

3 $1,102.50 $55.13 = $1157.63

4 $1,157.63 $57.88 = $1215.51

5 $1,215.51 $60.78 = $1276.29

Then there is Rule 72 which is basically an easier and faster method to gauge how long it would take for you to double your money. To do this, divide 72 by the current interest rate that you will be receiving. Therefore Suppose you invest $6000 at 6% interest rate. Therefore to double your money, divide 72 by 6, that is, it will take 12 years to double your money.

Another little trick to learn in how long your money will be tripled is by the rule of 112. This is a similar method. Just divide the number 112 by the rate of interest that you are getting to get the number of years. Thus if you take the aforementioned amount and the divide 112 by 12%, it will take approximately 9 years to triple that amount of money.

Thus Time value is an important issue in the discount buying industry and is also helpful in being able to increase your money.