The Time Value of Money (TVM) is the benefit of receiving money now over receiving the same amount later. A dollar today is worth more than a dollar tomorrow. This is because of money's potential. It can be invested in the stock market, earn interest in a savings account or used to start a business. The earlier you have money, the earlier you can take advantage of this potential. TVM Formula The TVM formula is a great tool to demonstrate this concept. Below are the variables behind TVM. FV = future value PV = present value r = rate of return n = # of compounding periods per year t = # of years The formula can be used to calculate future value : FV = PV x [ 1 + (r / n) ] ^ (n x t) This formula can also be re-arranged to calculate present value : PV = FV/[ 1 + (r / n) ] ^ (n x t) The TVM formula can be rearranged to calculate any of the above variables, but today we'll focus on present and future value. Let's take a loo