How can individuals utilize the concept of time value of money?

The concept of time value of money is foundational in finance and investing, as it highlights how the value of money changes over time. When individuals save and invest money for future growth, they take advantage of this principle by allowing their money to earn interest or appreciate in value. Investments, whether in stocks, bonds, or other financial instruments, typically yield returns that can compound over time, meaning that money invested today can grow into a much larger sum in the future due to the accumulation of interest or capital gains.

This practice underscores the importance of delaying immediate gratification for long-term financial benefits. By contributing to savings accounts or investment accounts regularly, individuals can benefit from compounding interest, which not only helps to increase the principal amount over time but can create significant wealth as interest is earned on both the initial amount and the accumulated interest. Thus, utilizing the time value of money strategically allows individuals to build a more secure financial future.