What concept emphasizes that a dollar today is worth more than a dollar in the future?

The concept that emphasizes a dollar today being worth more than a dollar in the future is the Time Value of Money. This fundamental financial principle asserts that money can earn interest, so any amount of money is worth more the sooner it is received. The rationale behind this concept is based on the potential earning capacity of money, which highlights how an investment can grow over time through interest or returns.

For example, if you were to invest a dollar today, it can accrue interest over time, thereby increasing in value. Conversely, a dollar received in the future does not have the same potential for growth, assuming no interest or investment is involved. This principle is critical in financial decision-making, impacting investments, loans, and valuations, as it underscores the importance of timing relative to cash flow.

While inflation rate, investment rationale, and future value are all important financial concepts, they do not specifically address the core tenet that the value of money changes over time due to interest and opportunity costs. Inflation, for instance, indicates that purchasing power may decrease over time, but it does not directly explain the accrual of value through time and investment as the Time Value of Money does.