The time value of money is a fundamental concept in finance that states a dollar today is worth more than a dollar tomorrow. This is due to the potential to earn interest or return on investment over time. For example, if you were given the choice between receiving $100 today or $100 in one year, most people would choose to receive the money today. This is because if you receive the money today, you can invest it and potentially earn interest on it. Understanding the time value of money is crucial for making financial decisions such as investing, borrowing, and saving. It helps individuals and businesses make informed choices about how to allocate their resources and maximize their wealth over time. By considering the time value of money, you can make better decisions about when to spend, save, or invest your money to achieve your financial goals.