Aegväärtus

Aegväärtus (time value) is a concept used to describe how the value of money, goods, or benefits changes with the timing of when they are received or realized. Etymology: from aeg meaning time and väärtus meaning value. In Estonian usage, the term is common in economics and finance to express that a sum received today is not equivalent in value to the same sum received in the future.

The core idea is that money available now can earn interest, offset inflation, and bear lower risk than money to be received later, making present value higher than future value. This principle applies to any decision where timing affects value, not solely to money itself. The time value of value guides assessments of options, projects, and trades across various contexts.

In financial terms, the time value of money is quantified through present value and future value. Present value PV = FV / (1+i)^t, where i is the discount rate and t is time in periods. Future value FV = PV*(1+i)^t. The discount rate reflects opportunities, inflation, and risk, while the time horizon t determines the strength of the effect.

Practical use includes investment appraisal, capital budgeting, loan pricing, and personal finance planning. Estimates depend on the chosen discount rate and assumptions about inflation and risk; small changes can lead to substantial differences over longer horizons. The concept governs decision-making in both corporate finance and everyday financial planning.

See also: time value of money, discounting, net present value, opportunity cost. Aegväärtus remains a standard term in Estonian economic discourse and is encountered in broader analyses of resource allocation and decision timing.