The time value of money describes the greater benefit of receiving money now rather than later. It is founded on time preference.
The principle of the time value of money explains why interest is paid or earned: Interest, whether it is on a bank deposit or debt, compensates the depositor or lender for the time value of money.
It also underlies investment. Investors are willing to forgo spending their money now if they expect a favorable return on their investment in the future.

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