One thing we were taught at Kickstart, while covering finances and accounting, was that getting 1000€ today is not the same as getting 1000€ in a year from now. This seems to be a basic thing you learn while studying economics but we, mere mortals, have difficulty in understanding. So what is the reasoning behind this principle?
1) Inflation: the price of goods and services rises and therefore what we can buy with 1000€ today is not the same as what we’ll be able to buy in a year.*
2) More importantly: even if the inflation was 0%, having 1000€ today is not the same since we can invest the money today and make.. well, more money. Otherwise we’ll have to wait a whole year before investing.
This becomes more obvious when considering more money and a larger span of time. 10.000€ will not have today’s value in 10 years.
I couldn’t find the name behind this principle of Economics but if you know tell us.
* assuming inflation is rising