Time is Money: The Future Value of Money
There are many reasons one would wish to receive money today as opposed to in the future. One of the major reasons is the time value of money. Most people would think that $100 today is the same as $100 in one year, or three years, or ten years. This is not true. Your money is more valuable today than it will be in the future. This concept is known as the time value of money and it is very relevant and important to understand if you own an annuity or structured settlement.
What your money is worth today is known as the present value. In order to have an equal amount of money in future years as you have today, you need to take into consideration interest rates and inflation rates. These rates or yields change with time.
These rates will impact the value of your money either today or in the future as well as what is known as the purchasing power of your money. Purchasing power of a dollar is the amount of goods and services that can be purchased with one dollar. Think about how much you used to be able to get with one dollar versus what you can get today. Over time you need more money to get the same goods. This is an example of why one would need more money in the future to have the same purchasing power today.
By receiving your future payments today, they may lose value slightly, this is known as discounting. This is the process of reversing the value of the future payments back to the present value of the money today. The result is you will have a lump sum of cash at its present value. One advantage of having a lump sum of present value cash is the purchasing power it holds. Among many other advantages of having a lump sum of cash, it can be invested differently to earn higher returns than being locked into an annuity for example.
The equivalent value of money for either present values or future values is simply determined by a mathematical equation. The equation takes into consideration interest rates over time and the time period between present and future. A financial representative or pricing manager from Rescue Capital can help you determine the present value of your future payments or what they are worth today.
About Rescue Capital
Rescue Capital is a customer-focused specialty financial services firm that offers cash lump sum payments for structured settlements, annuities, pending settlements and other assets. For more information, visit their website at
What your money is worth today is known as the present value. In order to have an equal amount of money in future years as you have today, you need to take into consideration interest rates and inflation rates. These rates or yields change with time.
These rates will impact the value of your money either today or in the future as well as what is known as the purchasing power of your money. Purchasing power of a dollar is the amount of goods and services that can be purchased with one dollar. Think about how much you used to be able to get with one dollar versus what you can get today. Over time you need more money to get the same goods. This is an example of why one would need more money in the future to have the same purchasing power today.
By receiving your future payments today, they may lose value slightly, this is known as discounting. This is the process of reversing the value of the future payments back to the present value of the money today. The result is you will have a lump sum of cash at its present value. One advantage of having a lump sum of present value cash is the purchasing power it holds. Among many other advantages of having a lump sum of cash, it can be invested differently to earn higher returns than being locked into an annuity for example.
The equivalent value of money for either present values or future values is simply determined by a mathematical equation. The equation takes into consideration interest rates over time and the time period between present and future. A financial representative or pricing manager from Rescue Capital can help you determine the present value of your future payments or what they are worth today.
About Rescue Capital
Rescue Capital is a customer-focused specialty financial services firm that offers cash lump sum payments for structured settlements, annuities, pending settlements and other assets. For more information, visit their website at
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