money has time value essay

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What Is Time Value of Money?
Understanding TVM

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Financial Ratios

Time Value of Money Explained with Formula and Examples

Katrina Ávila Munichiello is an experienced editor, writer, fact-checker, and proofreader with more than fourteen years of experience working with print and online publications.

Investopedia / Mira Norian

What Is the Time Value of Money (TVM)?

The time value of money (TVM) is the concept that a sum of money is worth more now than the same sum will be at a future date due to its earnings potential in the interim. The time value of money is a core principle of finance. A sum of money in the hand has greater value than the same sum to be paid in the future. The time value of money is also referred to as the present discounted value.

Key Takeaways

Understanding The Time Value Of Money

Understanding the time value of money (tvm).

Investors prefer to receive money today rather than the same amount of money in the future because a sum of money, once invested, grows over time. For example, money deposited into a savings account earns interest. Over time, the interest is added to the principal, earning more interest. That's the power of compounding interest.

If it is not invested, the value of the money erodes over time. If you hide $1,000 in a mattress for three years, you will lose the additional money it could have earned over that time if invested. It will have even less buying power when you retrieve it because inflation reduces its value .

As another example, say you have the option of receiving $10,000 now or $10,000 two years from now. Despite the equal face value, $10,000 today has more value and utility than it will two years from now due to the opportunity costs associated with the delay. In other words, a delayed payment is a missed opportunity.

The time value of money has a negative relationship with inflation . Remember that inflation is an increase in the prices of goods and services. As such, the value of a single dollar goes down when prices rise, which means you can't purchase as much as you were able to in the past.

Time Value of Money Formula

The most fundamental formula for the time value of money takes into account the following: the future value of money, the present value of money, the interest rate, the number of compounding periods per year, and the number of years.

Based on these variables, the formula for TVM is:

F V = P V ( 1 + i n ) n × t where: F V = Future value of money P V = Present value of money i = Interest rate n = Number of compounding periods per year t = Number of years \begin{aligned}&FV = PV \Big ( 1 + \frac {i}{n} \Big ) ^ {n \times t} \\&\textbf{where:} \\&FV = \text{Future value of money} \\&PV = \text{Present value of money} \\&i = \text{Interest rate} \\&n = \text{Number of compounding periods per year} \\&t = \text{Number of years}\end{aligned} F V = P V ( 1 + n i ) n × t where: F V = Future value of money P V = Present value of money i = Interest rate n = Number of compounding periods per year t = Number of years

Keep in mind, though that the TVM formula may change slightly depending on the situation. For example, in the case of annuity or perpetuity payments, the generalized formula has additional or fewer factors.

The time value of money doesn't take into account any capital losses that you may incur or any negative interest rates that may apply. In these cases, you may be able to use negative growth rates to calculate the time value of money

Examples of Time Value of Money

Here's a hypothetical example to show how the time value of money works. Let's assume a sum of $10,000 is invested for one year at 10% interest compounded annually. The future value of that money is:

F V = $ 10 , 000 × ( 1 + 10 % 1 ) 1 × 1 = $ 11 , 000 \begin{aligned}FV &= \$10,000 \times \Big ( 1 + \frac{10\%}{1} \Big ) ^ {1 \times 1} \\ &= \$11,000 \\\end{aligned} F V = $10 , 000 × ( 1 + 1 10% ) 1 × 1 = $11 , 000

The formula can also be rearranged to find the value of the future sum in present-day dollars. For example, the present-day dollar amount compounded annually at 7% interest that would be worth $5,000 one year from today is:

P V = [ $ 5 , 000 ( 1 + 7 % 1 ) ] 1 × 1 = $ 4 , 673 \begin{aligned}PV &= \Big [ \frac{ \$5,000 }{ \big (1 + \frac {7\%}{1} \big ) } \Big ] ^ {1 \times 1} \\&= \$4,673 \\\end{aligned} P V = [ ( 1 + 1 7% ) $5 , 000 ] 1 × 1 = $4 , 673

Effect of Compounding Periods on Future Value

The number of compounding periods has a dramatic effect on the TVM calculations. Taking the $10,000 example above, if the number of compounding periods is increased to quarterly, monthly, or daily, the ending future value calculations are:

This shows that the TVM depends not only on the interest rate and time horizon but also on how many times the compounding calculations are computed each year.

How Does the Time Value of Money Relate to Opportunity Cost?

Opportunity cost is key to the concept of the time value of money. Money can grow only if it is invested over time and earns a positive return. Money that is not invested loses value over time. Therefore, a sum of money that is expected to be paid in the future, no matter how confidently it is expected, is losing value in the meantime.

Why Is the Time Value of Money Important?

The concept of the time value of money can help guide investment decisions. For instance, suppose an investor can choose between two projects: Project A and Project B. They are identical except that Project A promises a $1 million cash payout in year one, whereas Project B offers a $1 million cash payout in year five. The payouts are not equal. The $1 million payout received after one year has a higher present value than the $1 million payout after five years.

How Is the Time Value of Money Used in Finance?

It would be hard to find a single area of finance where the time value of money does not influence the decision-making process. The time value of money is the central concept in discounted cash flow (DCF) analysis, which is one of the most popular and influential methods for valuing investment opportunities. It is also an integral part of financial planning and risk management activities. Pension fund managers, for instance, consider the time value of money to ensure that their account holders will receive adequate funds in retirement.

What Impact Does Inflation Have on the Time Value of Money?

The value of money changes over time and there are several factors that can affect it. Inflation, which is the general rise in prices of goods and services, has a negative impact on the future value of money. That's because when prices rise, your money only goes so far. Even a slight increase in prices means that your purchasing power drops. So that dollar you earned in 2015 and kept in your piggy bank buys less today than it would have back then.

How Do You Calculate the Time Value of Money?

The time value of money takes several things into account when calculating the future value of money, including the present value of money (PV), the number of compounding periods per year (n), the total number of years (t), and the interest rate (i). You can use the following formula to calculate the time value of money: FV = PV x [1 + (i / n)] (n x t) .

The future value of money isn't the same as present-day dollars. And the same is true about money from the past. This phenomenon is known as the time value of money. Businesses can use it to gauge the potential for future projects. And as an investor, you can use it to pinpoint investment opportunities. Put simply, knowing what TVM is and how to calculate it can help you make sound decisions about how you spend, save, and invest.

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Time Value of Money, Essay Example

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The concept of time value of money implies that a nominal or stated amount of money has more value now than in the future because inflation erodes the value of money over time as goods and services usually become expensive over time. Thus, for a stated amount of money to maintain its value, the interest rate has to equal the inflation rate and an interest rate greater than inflation rate means the money will grow over time and an interest rate less than the inflation rate means the opposite will be true. Thus, it only pays to lend or deposit money if the interest rate is at least equal to the inflation rate.

An example that demonstrates the time value of money may be a decision regarding a trip to Spain. I have determined that I can either go to Spain during Christmas this year or in 2014. If I go in 2014, I expect the trip to cost 2 percent more than what it may cost this year. My total budget for the trip is $1000. In other words, I would have to spend $1020 in 2014 but the opportunity cost of going on trip this year would also involve the annual 3 percent interest I could earn on $1000 by depositing in a local bank’s checking account. If I do so, the trip may prove to be cheaper next year because while the cost of the trip would go up by 2 percent, my interest income would be 3 percent which means the trip next year may actually be cheaper by 1 percent or $10.

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Time Value Of Money Essay Example

Type of paper: Essay

Topic: Management , Finance , Investment , Money , Banking , Learning , Future , Time

Words: 1400

Published: 01/21/2020

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introduction Time value of money is an important concept of finance and financial management. It has been said that the present consumption reveals more value than a future consumption and it is because of the fact that consumers have two options; either to consume it right away or forego it to avail it in future by investing the present amount (Houston, and Brigham, 2009). This report defines and highlights the importance of time value of money and also discusses the importance of time value of money for the financial managers. The report also calculates present value of money as well as the future value of money at different interest rates and duration. The report calculates the present and future value of annuities which are the annual stream payments. The report then discusses the main learning outcomes from this module.

Money losses its value with the passage of time particularly because different factors and inflation is the most important factor (Gitman, 2003). The value of $100 today is more than the value of $100 after 5 years because inflation would depreciate the value of $100 and fewer goods and services can be purchased from $100 after 5 years then today. In other words, it can be said that the value of $100 will have more buying power today than $100 after 5 years. So more things or value can be derived from $100 today than in 5 years from now. Thus, it shows that the money changes its value with the passage of time and as time passes, the value of money decreases and this concept is defined as time value of money (Besley, & Brigham, 2007).

Importance of time value of money to financial managers

Time value of money is an important concept in business as well. It is significant for financial managers need to understand the concept of time value of money because it influences the returns that the company would be making in the years to come. The financial managers not only need to understand the present value of future cash flows, but also the future values of a present investment they are making. Thus, they need to understand the concept of discounting (calculating the present value) as well as compounding (calculating the future value). There are different reasons why the financial managers need to understand and use the concept of time value of money and one of the main reasons is while making the investment decisions. The concept of time value of money has been used very frequently by investors and financial managers. The reason to use the concept of time value of money while making investment decisions is to analyze the worth of the investment. If the project is not going to yield sufficient returns or the present value of the future returns are not more than the present value of the investment then there is no point of making the investment. This concept is generally termed as Net Present Value of the investment (NPV) and it is used on a regular basis to analyze the worth of the project or investment decisions. Therefore, this is one of the reasons why investors and financial managers should understand the concept of time value of money (Gitman, 2003). Another important reason why the financial managers need to know and understand the concept of time value of money is that while raising funds they need to know the cost they would be paying to the bank or the financial institution or bond holders etc and by knowing the cost of the funds and the future value that would be paid to them, financial managers would be able to identify the present value of the future cash flows and then make an appropriate decision (McLaney, 2009).

Calculating future values

Formula to calculate the future values FV=PV* 1+in a. $150,537.19 if invested for seven years at a 5% interest rate b. $237,891.22 if invested for eight years at a 3% interest rate c. $320,891.12 if invested for ten years at an 11% interest rate d. $520,520.22 if invested for thirteen years with a 13% interest rate

Calculating present values

Formula to calculate the present values PV=FV/ 1+in a. $562,126.17 to be received seven years from now with a 5% interest rate b. $225,003.21 to be received six years from now with a 6% interest rate c. $321,567.35 to received five years from now with an 18% interest rate d. $63,000.05 to be received twelve years from now with a 5% interest rate present value of AN ANNUITY

Formula to calculate the present value of an annuity

PV=PMT*[11+in]

FUTURE Value of an annuity

Formula to calculate future value of an annuity FV=Cash flows*[1+in-1)i]

Learning from Module 2 Case Assignment

Module 2 case assignment has been helpful in making me learning a lot of things. The module 2 has helped me in knowing the value of money at the present time and also I have learnt that the value of money tends to decrease as the time goes on. The module has helped me in learning about the concepts that different factors such as inflation can influence the value of the money and thus the purchasing power or the buying power of the consumers decrease if the money is not spent today. Therefore, there are two options for the consumers; either they can invest the money to increase its value. For instance, investing the money in a bank would yield 5% annually and this would increase the money, though, not the value of money. So the consumer can have similar buying power in next year when he or she plans to spend. Not only this, I have calculated present and future values and thus, it can be said that this module has helped me in making basic calculations related to the present value and future value of money. Similarly, the module has been helpful in making me learn about the impact of the interest rate and the impact of the life of the investment can influence the value of the money. The module asked to identify the present value as well as the future value at different interest rates and at different durations of investment and thus, it helped me in analyzing and identifying the impact that these two factors make on the present value or the future value of the investment. So, I not only have learnt how to calculate the present value and future value, but I have also learnt and have understood these concepts, their implications and practical applications. In addition to this, the module has helped me in knowing how financial managers and business owners need to understand the concept of time value of money and how to use it in an efficient manner. There are different decisions that financial managers need to make and these decisions can be influenced because of the time value of money, so it is important for them to understand and use this concept.

Time value is an important concept in financial management and this report highlighted and discussed the importance of time value of money as well as the significance of understanding the concept of time value for the financial managers. The report identified the main reasons why the financial managers need to understand and learn these concepts. Moreover, I have also calculated the present and future value of cash flows along with calculating present and future values of annuities in this module. The last section of the report discusses about the main learning that I have learnt from this module.

Besley, S., & Brigham, E. (2007). Essentials of Managerial Finance, 14 edn. USA, Thomson Higher Education. Gitman, L. (2003). Principles of Managerial Finance. Boston, Addison-Wesley Publishing. Houston, F., and Brigham, F. (2009). Fundamentals of Financial Management. Ohio, South-Western College Pub. McLaney, E. (2009). Business Finance: Theory and Practice. Pearson Education: New Jersey.

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Essay types

The Time Value of Money

Date published: 22 Nov 2022

Format: APA

Academic level: College

Paper type: Essay (Any Type)

Words: 1082

Downloads: 0

P = the principal amount.

I = rate of interest stated as a decimal

n = is the number of compounding periods per year.

T = this is the time expressed in years.

i = 5 / 100 = 0.05,

Calculation

After 20 years, the total amount of money deposited by Mary will certainly have changed. The principal amount will have increased. And the Principal will become the amount currently in the account. If Mary chooses to close the account after making another deposit of $500, she will get an amount of $16,533 from the bank at the end of the last deposit and closing of the account. Taking into consideration the compound interest accumulated over the years, the interest amount cannot be the same (Jo, 2013).

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This is like an investment to Mary. Since the power of compounding enables Mary's money to grow exponentially over time. This is so because the returns from previous years remain invested.

Total amount per year = $75,000.

Period to be paid=20 yrs.

Interest rate=7%

Total amount to be earned after 19 years:

This is the total amount of money to be paid by the university each year. So after 20 years, the total payout will add up to.

$2,803,422.37

+ 75,000.00

$ 2,878,422.37- The total amount she stands to benefit.

Since Mary wants to be paid the whole amount a once, we have to calculate the present value of an annuity. This is supposed to show the total amount that she is likely to receive after 20 years. The present value of an annuity is the sum of all payments made and the interest earned on an account ( Koening, 2011).

i=interest rate (this is the amount charged and is expressed as a percentage of principal)

FV=future value - this is the value of the amount or an asset at a specified date

t = period

n = number of times the interest is compounded per year

The total future value to be paid to Mary is;

Therefore, if Mary wants to be paid the total amount at once, she is likely to receive a total of $743,839.039 .

According to the calculations above, it is very crucial and critical to consider the necessity and importance of being paid in a one lump sum.

The present value of annuity represents the promised future payments which have been discounted to an equivalent value right now (Koening, 2011). To come up with the present value of the deferred annuity, we can discount the previous figure using the given interest rate and the number of periods before the payments commence. We can achieve this by using the PV formula: PV [(1/(1+r))^t], PV stands for the amount at the start period when the payments begin, and t represents the number of periods at the time when no payments are made (Koening, 2011). But in this case we have already obtained the future value; we can easily obtain the present value using the future value and the period remaining after the three years.

The Present Value of Annuity is;

FV=Future Value

i=Interest Rate

t = number of years the amount is deposited or borrowed for.

Future Value is the total amount to be paid to Mary

Mary will receive a total of $ 882,427. This shows that the additional working period would increase the present value of her bonus. Present value calculations entail the compounding of interest . It implies that any interest earned is reinvested and will earn interest at the same rate as the principal . In other words, you gain "interest on interest." The compounding of interest can be very significant when the interest rate and/or the number of years are sizable ( Averkamp, 2018).

If Mary has decided to pay half of the school fees, which is $5500, then the $5500 is the principal amount. The interest rate that is used is 4% and is compounded annually. The time for starting college is also shown as 10 =10 years. The school Fees is likely to increase by 7% per year. In Mary's case study this can be solved by calculating the present value of the annuity of each payment using the present value formula (Averkamp, 2018). We can then add up the results from every calculation.

The calculation below shows the total fees that Mary will pay each year at Beth’s college.

The total fees that Mary will contribute to Beth’s college education will be.

$39, 343 + $47,597 + $56,428 + $65,879 = $209,247

Since Mary wants to start making deposits yearly, every deposit she makes will cover will cover the fees she will contribute to Beth’s college fees. These deposits will then earn an interest of 4% each year for six years until Beth starts college.

Calculation of the total amount

P = principal amount

I = annual rate of interest

n = number of interest periods

A = amount of money accumulated after n years, including interest.

From the case study we can tell that: P =? i = 4 / 100 = 0.04, n = 6, A=$ 209, 247

We are trying to find P which is the deposit amount to be made by Mary.

209,247=6.67P

P=$ 31,546.47

The deposit amounts that Mary will have to make will be $31, 546.47 each year for six years in order to be able to pay part of Beth’s fees.

If someone receives money today, it is likely to grow over time. This is due to the aspect of time value of money. This shows that money of a certain figure is more valuable right now than a year from now (Jo, 2013). Like in the case study of Mary, she will get more money because money received twenty years from now has a smaller present value than the money she would have received right now. The case study also depicts that calculations of present value can help individuals to understand aspects like the amount of money they can invest now in return for a certain value of cash to be received in future.

References

Jo, M. (2013). Compounding vs amortizing interest-the Untold Story . Retrieved from http://fiscalbridge.com/compounding-vs-amortizing-interest-the-untold-story/

Averkamp, H. (2018). Present value of an ordinary annuity . Retrieved from https://www.accountingcoach.com/present-value-of-an-ordinary-annuity/explanation

Financial Mentor. (2018). Compound interest calculator (Daily to Yearly) . Retrieved from https://financialmentor.com/calculator/compound-interest-calculator

Koening, E. (2011). Present value calculations for a deferred annuity . Retrieved from https://www.sapling.com/8191251/present-value-calculations-deferred-annuity

MoneyHabits. (2018). The different types of interest . Retrieved from http://www.moneyhabits.com/types_of_interest.htm

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Time Value of Money: Importance of Calculating Essay

Introduction, time value of money, importance of time value of money, reference list.

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Due to fluctuations in economies, all organizations need to take into consideration concepts of the time value of money in any investment venture. Calculations of future outcomes from current investments play the central role in determining an organization’s sustainability in times of turbulent variations in economies. For example, the value of business units never remains stagnant, but they are in continuous change, hence necessitating organizations to adopt strategies, which will ensure economic sustainability of their businesses. Time value of money not only affects business finance, but also affects both government and user finances, who are the main stakeholders in an organization (Garrison, 2009, Par. 1).

Time value of money (TVM) is a monetary approximation, which gives worth to money at hand more value than future expectations of financial gains. It helps in weighing investment ventures, hence providing solutions to financial problems primarily resulting from mortgages, allowances, and savings. Finances held presently by an organization are more worth compared to expectations of future gains because the organizations can invest them, hence gain an organization profits in the future. The main principle of investment in TVM is; organizations can convert future expectations of monetary gain to an equal value “today.” Organizations can calculate future gains from an investment so long as any four of the following are available: current expenditures, present and expected future value, charged interest rate, and time span needed for an investment (Cedar spring software, 2002, Para 1-4). In TVM, organizations obtain future value through compounding interest, which present investments will bring into an organization. As operational time changes, organizations should add obtained gains on investments to original invested capital, which an organization should use to calculate future times interests.

For organizations to avoid risks associated with poor investments, they should always consider both the incremental and total cash flows resulting from an investment. This involves analyzing the following components: previous outlays, scale value, expected cash flows from ventures, terminal value, and correct timing in organizing investment projects. All these should play a central in all decisions made by an organization to ensure viability of business ventures. In business, positive incremental cash flows play the central role of giving business directions, because it indicates sustainable business ventures (Adair, 2005, pp. 185-187). For organizations to meet all business obligations for example loan repayments and payroll requirements, they must always keep correct records of their cash flow, for they will help to maintain the credibility of businesses to both investors and stakeholders. On the other hand, for organizations to calculate correctly time value of money, they have to consider initial investment cash, all operating cash flows, investment cash flow, financing cash flow, and end cash flow. This will guide correct decision-making in terms of business investments with minimum risks and maximum profits, within planned or approximated time. In calculating TVM, net present values (NPV) help organizations to analyze profitability of projects whereby analysis of cash inflows and outflows helps in drafting correct project budgeting for organizations. The sensitivity of NPV helps organizations to calculate profits, which an organization can gain from an investment, hence enabling management and planning teams to take corrective actions in project investments. NPV takes into consideration both the inflations and outcomes of investment projects, whereby it applies the principle of investment depending on the outcome. In this regard, if management teams suspect a likelihood of occurrence of a negative NPV then, they should cancel or avoid such investment opportunities. This is because the probability of occurrence of negative cash flows from such an investment is high (Glink, 2009, p.1). In addition, to calculate NPV organizations need to consider the discount rate, which may result from future cash flows about present values. The majority of organizations prefer high discount rates as the main substitution for risky projects; this is sometimes necessary but, time consideration as dictates NPV is important because it helps in determining the yield curve. This helps to reflect the real scenario of a business venture, hence guide the decision-making process (Herrick, 2003, PP. 254-259). Consideration of payback period is also important to calculate TVM of any investment. It helps in decision making in that, an organization can accurately determine the amount of time a specific venture will take before repaying invested money. At all times an organization needs to adopt business ventures with the shortest payback periods in order to lessen limitations that may result from investments. Although this method is good, it has many limitations, in that it lays less emphasis on time value of money. When using this approach in decision making organizations should take precautions by incorporating other methods such as the internal rate of return to ensure assumptions made are correct. Discounted payback period helps to account for all business flaws, which may occur by considering inflation and the amount of interest investment will give an organization. In addition, payback calculations are important because they can help managements to evaluate various business ventures hence, make correct investment choices, which will ensure the viability of an enterprise (Pisello, 2005, Par. 1-5).

In conclusion, it is very essential to correctly approximate the time value of money because it helps in giving clear outcomes of ventures an organization seeks to invest in. In addition, correct calculations can help an organization determine the amount of time it will take an organization to realize expected profits, hence take correct measures to avert associated risks.

Adair, T. A. (2005). Corporate finance demystified. Columbus: McGraw-Hill. Cedar spring software. (2002). Time value of money. Get objects . Web. Garrison, S. (2009). Time value of money. Study finance. Web. Glink, I. (2009). Calculating the net present value (NPV) of a foreclosure vs. a loan modification. Money watch . Web. Herrick, D. F. (2003). Media management in the age of giants: business dynamics of journalism. New Jersey: Wiley-black well. Pisello, T. (2005). Why pay back periods are important. Sap tips . Web.

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Time is More Valuable than Money

You can use your time to make money, but you can't buy more time..

Posted September 20, 2009 | Reviewed by Jessica Schrader

Most people look at their bank accounts with great attention and assess how much money they have to spend, to invest, and to give away. But they don’t look at their time the same way, and end up wasting this incredibly valuable resource. In fact, time is much more valuable than money because you can use your time to make money, but you can’t use money to purchase more time.

Time is the great equalizer. Each day has only 24 hours—nobody has any more than anyone else. Everyone, from poets to presidents, fills those hours, one after the other, until they are all filled up. Every single minute is unique, and once gone, can never be regained.

When you look at someone who has accomplished a lot, you can be pretty sure that he or she has spent considerable amounts of time mastering the required skills, filling hours upon hours with hard work. There are those who look at others’ accomplishments and say, “I had that idea," or “I could have done that.” But ideas are cheap and intentions are just that. If you don’t invest the time needed to achieve those goals then all you have are empty ambitions.

People often say, “I don’t have the time to …” Fill in the blank with whatever you like: exercise, make dinner, write a book, start a company, run for political office. What makes these people think that they have less time than anyone else? Of course they don’t. We all have the same 24 hours in each day and make real decisions about how we spend them. If you really want to get in shape, then carve out time to exercise. If you want to write a book, then pick up a pen and do it. And, if you want to run for president, then get started. It isn’t going to happen if you plan your day around your favorite TV shows or spend hours updating your Facebook page. These are entertaining distractions that eat up your irreplaceable time.

I teach a course on creativity and innovation at Stanford University. During a workshop on how to brainstorm, I often give the following prompt: There aren’t enough hours in a day. Come up with creative solutions to this dilemma. The brainstorming results in an endless list of solutions—from the practical to the preposterous—demonstrating that there are lots of ways to extract more from each hour, each day, and each year. Some of the most interesting solutions involve figuring out how to do two things at once. I know many people who have successfully incorporated this approach into their own lives.

For instance, I met a woman named Audrey Carlson several years ago who was struggling to figure out how to spend time with her friends and take care of her growing family. She started a group called “Chop and Chat.” Every Sunday, six friends got together to cook at a member’s home. Each member brought the ingredients to make a different recipe that was then split into six portions. Members took home six different main courses for the week. Chop and Chat was an inventive way for the women to cook together, socialize, and prepare meals for their families.

Another example is venture capitalist Fern Mandelbaum. You would assume that meetings with Fern take place in her office … and you’d be wrong. Fern is an avid athlete and her meetings take place on hiking paths. Everyone who knows Fern knows to wear walking shoes and carry a bottle of water to their meetings in anticipation of a strenuous hike. Fern finds that this strategy is a great way to get to know each entrepreneur while also getting exercise.

There is an oft-quoted saying that "time is money." You can interpret this to mean that time is a valuable currency. In fact, each day another 24 hours is deposited into each of our “bank accounts.” We get a choice about how to spend these hours. We decide how much we spend right away, how much gets invested for the future, and how much we give away. The worst choice is to waste these hours by letting them slip away.

It is almost noon, and I have 12 more hours to invest today!

Tina Seelig is the author of What I Wish I Knew When I Was 20 .

Tina Seelig, Ph.D., is a professor at the Stanford School of Engineering. Her latest book is Insight Out .

Knowing what you value will help you build the most meaningful life possible.

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money has time value essay

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