From the course: Managing Your Personal Investments
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Time value of money
- Some of the more mind-bending economic and financial concepts, are the ideas of compound interest, inflation, present value and future value. It's important to understand them, as so many at our big money questions that are fundamentally emotional, can be answered clearly with math. I promise I'm not going to make you learn tricky formulas in this video, but I am going to share ideas on how to think about the relationship between time and money in a different way. First, you've heard the expression, time is money. It's usually applied to time wasted when you could be earning money or doing something productive. But it's even more applicable when it comes to investing. Let's start with the idea of compound interest, which is basically the way that money you invest, grows exponentially versus in a straight line. Exponential growth, means that you earn money on the money you've already earned. To put it in real terms,…
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