The time value of money is one of the cornerstones of the financial services industry and indeed the investment community.
In relation to personal financial planning, accumulating funds to cover future needs is a constant topic. These needs can be providing Life Assurance cover to provide for dependants, saving to grow a capital sum or perhaps investing a lump sum to grow and be drawn down in the future.
It is important to understand that the value of a Euro changes over time, a Euro invested today will accumulate over time with interest to amount to more than a Euro. Due to inflation, a Euro in 20 years will be worth less than a Euro today, that means the goods and services you can buy today with your Euro will cost more in 20 years.
Think about the penny sweets you could once buy versus what you get for a penny today, or indeed anything you could buy for a certain sum versus what it costs today.
So when assessing a future financial need allowance should be made for anticipated …