Time Value of Money Believe it or not, many people over the years have thought that by putting money aside, under the mattress or even in the cookie jar, they would eventually be rich one day . Well, not to spoil the surprise, but the years it takes to get rich through these means are far away and there is nothing in between. This is where the time value of money comes into play. The time value of money is the idea that a dollar today will be worth more than a dollar in the future, even after adjustments in inflation, interest rates, and appreciation until the dollar's time comes. to be received in the future. Investing in simple terms. There are several financial applications of the time value of money. This document will identify several financial applications and the components of a discount and an interest rate. The objective is to list various financial applications and explain the components of discount and interest rates. Financial Applications The time value of money can be applied to many everyday financial decisions. Suppose a parent wants to set aside current funds for their child's educational future. Several factors will influence the ability to generate a return, such as the number of periods involved and the interest rate charged. For this reason, the concept of the time value of money can be calculated using various financial applications. Financial applications consist of future values ​​and present values, income and return on an investment, which will be discussed. When considering the previous example of setting aside funds for college, the parent may need to be aware of various future and present values ​​of money. In 50 years, “tuition at the average private university (over four years) will go from $64,000 to $455,000” (Block, 2005, p. 244). Interest rates charged over time directly reflect and indicate how much a dollar amount will be worth, also known as the future value of a single amount. The present value of a single amount has an indirect relationship with the future value. Present value implies that a discount rate is in effect, since the amount is worth less in the present than in the future. So, what the parent puts into the college fund today will be worth less now, but in the future the amount will be worth more..