The Importance Of Knowing The Value Of Money Over Time

Within corporate finance, there is an element that is confusing, and of great importance, I mean the amount of money over time, it is essential in areas such as capital budgeting, leasing and purchasing decisions, analysis of accounts receivable, Financial Agreements, mergers and management of pension funds.Let’s suppose a simple example to understand the relationship that a euro can have today with one in the future: A SME wants to invest 100,000 euros in a project in Madrid, which according to the analysis should yield 15,000 euros per year for nine years. The question is: Should the company accept the plan?

At first glance, it could be said that yes, since if we add the total income of nine years we see that it throws the amount of 135,000 euros, which are considerably higher than the initial outlay.

However, we must consider that the disbursement to invest is immediate, yet the 15,000 euros are received in the future.

 On the other hand, the initial capital required represents a decrease in liquidity, without knowing exactly if the income will be given as predicted.

I must clarify that the value of money over time is intimately linked to the concepts of future value and current value, which I will define with examples in subsequent deliveries.

How Important Do You Give Money?

Stop to think what the money means to you. For many, money is everything because without it we cannot do anything, everything in life is based on transactions and money is involved. For others, however, money is nothing more than a currency that has no added value, since happiness is not in material possessions.   They say that money does not give happiness, but they also say that it helps to obtain it. How important is money in our life? The balance between these two options is ideal. Being aware of the importance of money in our society and the real value it has will help us to manage it correctly and to plan for the future. So that the bull does not catch you in the golden age, the ideal is that you have been aware of the value of money and have been saving little by little. If on the contrary, you have not done it that way, you can take a scare when you reach retirement and want to continue with your standard of living and you cannot.
It is because of these uncertainties that it is necessary to know the relationship and the effects that a euro will have on the company today and a euro (perhaps uncertain) in the future before deciding to carry out a specific project or not. These two opposite views are the most radical, but what do you think?
While we are young, we do not think so, but as we get older, the concern for savings tends to increase. See that every time there is less for retirement, but that you still do not have the pension you had in mind, makes us stop to think and find a method of saving. At this time, if you did not give importance to the money, you start carrying it.
As we talked to you on numerous occasions, knowing how to manage money and allocate a part for savings is essential for an excellent domestic economy. Start learning to save little by little and then leap savings insurance, pension plans or investment plans.
We offer you different savings methods that fit your profile according to your needs. We know that it does not save the same way a bachelor of 35 years without children, that a family of 4 members.

Savings Plans, Stocks … What Do You Do With Your Money?

Each of us allocates the money for a specific goal, some can think of the dream retirement, others to buy a house and some in the future of their children. Whatever your purpose, you must think about what to do with your money.

The way to reach your goal is simple: you must allocate part of your monthly income to the future. If after making accounts you believe that with your current income and future income forecasts will not reach you for that long-term goal, you can think about putting your money to work.

Before launching to invest your savings like crazy, investigate what each of the options consists of and choose the one that best meets your expectations. You must be very sure of what each one consists of and the benefits you will get.

There are many investment methods; then we will see some of the best known:

Venture Capital

It consists of financing a company with high growth potential in exchange for participating shareholder.

This method is a way to invest in new businesses and startups. If you do not want to spend directly in a company, you can choose to participate in venture capital entities.

Stocks or Equities

It is the best-known method of investment, but that does not mean that it is the simplest. Before launching yourself to buy and sell, as if it were the wolf of Wall Street, do your homework.

One of the primary rules is that you do not invest the money that you will need in a short period. This is so because although you can quickly dispose of the funds spent by selling the shares, you may be forced to do so below the amount at which you acquired that share. Remember that the world of the Exchange is very variable.

Bonds and Obligations of the State

Another way to invest your savings is with the securities issued by the State for a period exceeding two years. The Bonds and Obligations are the same in everything except the terms, in the Bonds it varies between 2 and five years, while the Obligations are always superior to 5 years.

These securities are acquired in a competitive auction, and the offers must be at least 1,000 euros and always multiples of 1,000.

Savings Plans

Savings plans are medium-term savings products designed for retirement. Among its benefits, the one that stands out is that they are exempt from taxes.

There are different types you can choose from, on the one hand, the Individual Long Term Life Insurance, SIALP; on the other, the Individual Long-Term Savings Accounts, CIALP.

Remember that you can only hire a savings plan per person, that the money cannot exceed 5,000 euros per year and that the investment term is five years.

If you need advice on savings plans, our agents will be happy to answer your questions and queries.

Always remember that it is essential to encourage savings in the family, in addition to investing part of the savings to get an individual return on money.

OUR CHILDREN AND THE IMPORTANCE OF MONEY

As parents, our primary goal is for our children to be happy. Happiness is composed of several factors, without a doubt the economic factor plays an indispensable role in the achievement of that happiness.

As parents, we must teach our children that money, whether we agree or not, is the universal instrument to satisfy a large part of our needs and many of our tastes and goals.

Economic Peace must be learned from home. The proper handling of personal finances is a matter that must begin at home. As responsible parents of the financial health of the family group, we must be an excellent example for our children.

Depending on the attitude we have towards money, whether we waste it or on the contrary that we have the responsible management of it, the chances of our children repeating our behaviors are very high.

Remember that one of the sources of learning for every human being is observation. Children tend to learn and repeat the behaviors of their parents and the people that are very important to them.