We always hear the saying that “Time is Gold”. In business, it is significant to note that ‘time is money’ and therefore time, in itself, has value. And so, in effect, as time passes by, your money on hand changes. How can this be?
This can be explained by one of the most basic concept in finance – The Time Value of Money.
Let me explain to you in simplest terms. Money you kept in your cabinet drawer will not generate any income as opposed to the same amount deposited in a bank.
After one year, the money kept in your drawer will have the same face value but the same amount deposited in a bank will most likely earn an interest. Therefore, you can say that the money left idle has lost some of its ‘value’ due to the passage of time.
Why? Its value has been decreased due to inflation. After one year, the same amount can buy fewer goods and services. Its purchasing power has greatly decreased. And so we are always advised to look for opportunities where we can invest our money. Not only that we have to consider that our money must earn, but we must also consider to look for opportunities available that can beat the inflation rate.
1 comments:
While this is not the best option to earn from your money - putting some in a reputable bank is a wise move. I always try to avoid putting my money in banks that may be out of business after a while.
And if you have a little extra, its best to keep some. Mutual funds used to be a good investment before but... with the collapse of Bear Stearns, Lehman Brothers, Merrill Lynch, AIG - nothing is safe anymore
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