Why is money available today considered more valuable than the same amount in the future?

Money available today is considered more valuable than the same amount in the future primarily because it can be invested to earn interest. When you have money now, you have the opportunity to invest it in various financial instruments such as savings accounts, stocks, bonds, or other opportunities that can generate returns over time. This ability to earn interest or returns means that the money can grow in value before it is needed later, thereby increasing the overall amount of wealth over time.

Additionally, this concept is grounded in the time value of money, which suggests that money has the potential to generate additional income while invested. The longer money is invested, the greater its potential to appreciate due to compound interest, where not only the initial amount earns interest over time, but the interest itself also earns interest.

While inflation is a factor that erodes the purchasing power of money over time, the capacity to invest and grow money into a larger amount is a more direct reason why current funds hold greater value. Future money, despite being the same nominal amount, lacks this immediate earning opportunity, making present money more advantageous from a financial perspective.