This past week, my finance class reinforced this principle taught by my father. I learned about the time value of money. We discussed bonds and annuities, learned how to solve for variables on the calculator, and then at the end, my professor brought up retirement plans. Working a few problems, he gave us the key to retiring as millionaires: start saving now. With 45 years until I retire, the payment I would have to make now in order to have a comfortable retirement is significantly less than what it would be if I started saving twenty, ten, or even five years from now. Having the background context of the time value of money helped me to understand fully my father's advice.
I think it's hard for most people to look so far in the future and stay committed to a course of action, but in this case, I think it's worth it. I can't say that I'll specifically set aside a part of my paycheck for retirement, but I will look over my finances to see if I'm saving an adequate amount to get started. I'm grateful for the good example of my father in managing finances; he's always right!
I have really enjoyed learning about the time value of money in finance! Partly because it is so much easier to enter the values into the calculator than solve an equation.. haha. But it also shows how important it is to invest resources. With money, depositing 100 dollars each month will compound to a sum greater than the whole with interest. However, I feel it is almost the same with all investment. If we invest our time into studying, a little bit at a time, over a longer period of time, that resource will compound and be greater than the whole.
ReplyDeleteI loved this part of FIN201! TVM is the bomb! It really does enforce the concept when so little money could be invested today and 50 years from know you'd be sitting on millions. I too need to start buckling down and consider what is really important right now to start saving for the future.
ReplyDeleteTime is money! hahah We normally think of that as our time, but we don't think about time value of money. The longer our money sits the more money we make! Its a great thing if we can take advantage of that principle now because it will benefit us some much in the long run. But too often we are faced with our needs of today and the fun we could be having with that money, that we lose track of where we really need to put our money. If we could only listen to some of lessons our parents try and teach us, we would be a little better off in the end!
ReplyDeleteI remember that part of Finance, it was mind blowing. I think it is really interesting how intelligent our parents really are. It is hard to see it growing up but when you have to start your own life you realize how much they taught you and how much you can actually learn from them. Sometimes it just takes a second source to see that. That you for your post, it really makes me want to start looking through my finances and look towards the future.
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