Time value of money is a foundational financial concept stating that a given amount of money is worth more right now than the exact same amount would be worth at some point in the future, simply because money in hand today can be invested and start earning returns immediately, growing larger by the time that future date arrives.
This principle underlies almost every financial decision and calculation — from why a SIP encourages starting early, to why loan EMIs are structured the way they are, to how a pension or annuity payout is valued today. It also explains why ₹1 lakh promised to you 10 years from now is genuinely worth less to you today than ₹1 lakh handed to you right now, even before considering inflation, which further compounds this effect.