Time Value of Money Calculator Guide

The time value of money (TVM) is one of the most fundamental concepts in finance. A dollar today is worth more than a dollar tomorrow due to its earning potential.

How This Calculator Works

> [!IMPORTANT] > Key Insight: Understanding TVM is essential for making informed decisions about investments, loans, retirement planning, and any financial choice involving money over time.

This calculator determines:

Future Value (FV) - What your money will grow to
Present Value (PV) - What future money is worth today
Impact of Compounding Frequency - Daily, monthly, annually

The Formula Explained

FV = PV × (1 + r/n)^(n×t)

Where:

FV = Future Value
PV = Present Value (initial investment)
r = Annual interest rate (decimal)
n = Compounding periods per year
t = Time in years

Step-by-Step Example

Scenario: Invest $10,000 at 7% for 20 years

Compounding	Formula	Future Value
Annual (n=1)	$10,000 × (1.07)^20	$38,697
Monthly (n=12)	$10,000 × (1.00583)^240	$40,387
Daily (n=365)	$10,000 × (1.000192)^7300	$40,552

Frequently Asked Questions

Why is money worth more today?

Money today can be invested to earn returns. Inflation erodes purchasing power over time. There's also risk that future payments may not occur.

What's the Rule of 72?

A quick estimation: divide 72 by your interest rate to find how many years it takes to double your money. At 8%, money doubles in approximately 9 years.

How does compounding frequency matter?

More frequent compounding means interest earns interest more often, resulting in slightly higher returns. The difference is most noticeable over long periods.

Key Points to Remember

Start investing early - Time is your greatest ally
Higher rates accelerate growth exponentially
Compound interest is powerful over decades
Use PV to compare future cash flows today

Time Value of Money (TVM)

Inputs

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Calculated by CalcuFinance Team

Sources & References