They say "time is money" and well it's not just one of those baseless sayings. Economics proves the same!
Have you wondered why Scrooge Mcduck was so damn rich?
It was not just because he was a greedy investor but also because he was a miser and pretty sure he understood the concept of TVM in his fictional world (or his creator did at least)
Now let's dive deeper into the details to explain you the concept.
These bills are considered money because they represent a value ie. a legally recognised purchasing power for various goods and services. This value is called the extrinsic value of money. Rare and antique coins, on the other hand are held for their intrinsic/numismatic value which is a value based on how old or antique, the coins are.
At this juncture, it’s safe to tell you that money has another value called TIME VALUE!
Yes, you read right!
“Does this mean that money ages with time?”.
"Yes Darling, Money is like fine Wine!"
Just like it’s always more valuable (in this case tasteful) when you buy a bottle of wine today vis-a-vis sometime in the future, similarly money received today is much more valuable than the same amount of money received sometime in the future. This concept is called the Time Value of Money.
If we were to give you an option - to receive INR 100,000 today or INR 100,000 a year later, most rational people would choose to receive the money today.
So in line with #YOLO, one would take the money today instead of a year later. As instinctive as that decision is, there is also a logical reasoning behind it. When you receive the amount of money today, you can either spend it or invest it.