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# The time value of money - German Nande

More From: TED-Ed
1468 ratings | 209549 views
View full lesson: http://ed.ted.com/lessons/how-to-calculate-the-future-value-of-your-cash-german-nande We've all heard the phrase "Time is money." But what do these two things actually have to do with one another? German Nande explains the math behind interest rates, revealing the equation that will allow you to calculate the future value of your money (if you wisely put it in the bank, that is). Lesson by German Nande, animation by TED-Ed.
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NISAR AHMED (3 months ago)
Well, this was not the genre of TED-Ed
William Muhlbach (4 months ago)
At 1:10 I think someone confused the future value equation with the compound interest equation
Inflation ruin this how....
thinguyen nguyen (5 months ago)
Time=money ATM machine=time machine
Vic TET (6 months ago)
With a little bit of arranging *does extremely complicated equations* I hear the bus is pretty cheap!
gq be (7 months ago)
인플레이션 설명하려고 한 건 알겠는데, 비유가 진짜 뭣 같아서 복리이자 가르치려드냐 다들 비꼬고있네 ㅋㅋㅋ
Aeris Reyha (7 months ago)
5 years is enough to stabilize your bussiness if you use that money to invest or do a bussiness... And 20 years is enough to get you rich by your own bussiness if you make many decicions right and carefull...
Global Finance School (7 months ago)
What is Time Value of Money and more importantly, how does it affect your personal finance? The time value of money (TVM) is an important concept to investors because a dollar on hand today is worth more than a dollar promised in the future; the dollar on hand today can be used to invest and earn interest or capital gains. Read More Here: https://www.globalfinanceschool.com/blog-post/time-value-money
Leandro Prazeres (8 months ago)
People are complaining about lots of stuff, and I just want to add that the formula they're showing at 1:10 is wrong.
Charles Gancarz (11 months ago)
It's compound interest explained. Not sure what this 'time value of money' title has to do with it.
dlikt (1 year ago)
and then timmy took a loan to buy the car, and became a slave for the rest of his life... but that car really helped him impress his friends, right?
Mr. Camel999 (1 year ago)
Poor Timmy
SuperPapasss (1 year ago)
investing on your life savings...and its gone.
Im in 2016
AttemptsAreGood (1 year ago)
TED-Ed: This video has nothing to do with education on the time and value of money. One year later.......inflation? One year later.....quantitative easing? One year later.....war? Calculating the value of money is not taught here, at all. It is wholly indoctrination. This seems more like some 1050's "Duck and Cover" style propaganda.
They messed up the formula while rearranging it. I hope I'm not the only one who noticed it, lol
prashant bisht (1 year ago)
you forgot to take into consideration the inflation effect. with a interest of 10% on bank deposits for a year and no inflation in prices seems a fairy land tale... and of course the income tax... on the interest.
Charu Sahu (1 year ago)
OMG, I didn't notice it was Addison Anderson's voice!
سجاد علي (1 year ago)
هههههههههههه
سجاد علي (1 year ago)
هههههههههههه
سجاد علي (1 year ago)
ههههههههههه
سجاد علي (1 year ago)
ههههههه
Ben Cosham (1 year ago)
This video is not saying support corrupt banks. It's really just explaining the maths behind a highly theoretical and unrealistic example.
NexoFX ISKU (2 years ago)
Phew, with such great interest rates like 0.5 at best or so I would be lucky if we had to just wait for 26 years to get anything.
Jennymk01 (2 years ago)
No no save your money and get a older car. Then you will be able to pay off your car and live without debt.
David Belcher (2 years ago)
Oh, my advice is Not to keep it in the bank.....rather, invest it yourself!!! Why let other people get wealthy off YOUR money?!? Invest it and make that money for YOU!!! There are plenty of very Safe yet low-yield investments you can make. And YOU don't forfeit total control of YOUR money that way!! The banks have screwed us ALL enough....time to starve the crooks!!! Who the hell needs their pissy little 2%-3% interest anyway?!?
Kelly He (1 year ago)
wtf 2-3 percent thats wayyy too fucking high thats 2-3 mil per year with a billion dollars what
Cheapskate X Videos (2 years ago)
2-3%? The highest interest rate I've seen in my life was 0.4%.
Brinner Dang (2 years ago)
Oh, poor Sheila. She saved her money for a year and the inflation rate outpaced her interest earnings. Then Bain Capital bought out her employer and raided her retirement fund. Now Sheila has thirteen cars and an account in Panama since she discovered she can make \$10,000 a night escorting bankers conventions. (You can, too! Ask me how! WINNING!!! ;)
Michael Mike (2 years ago)
... no actual notion. Just a course of high school Maths!!!
TheFinalChapters (2 years ago)
This video sponsored by Bank of America. Since bank accounts barely make any money.
David Belcher (2 years ago)
Yeah, I wondered why this had so many downvotes. Now that I've watched it I fully understand. Must be some bankster bitchboy who made it or sone thing. And you are absolutely correct....interest rates are SO Low that it is totally pointless to put money in a bank for the purpose of letting it grow. In reality, the only ones who benefit or gain Anything worthwhile at all from money deposited in banks are.... *The Banks*!!! They get to invest your money and possibly make a fortune from *Your* money while you get NOTHiNg!!! Then there are always the negative consequences of keeping it in a bank....you can't simply withdraw your money when you want. once they have your money *They* control When you can access it, Where you can access it and (worst of all) How Much you are allowed to take out.
niko (2 years ago)
I felt dumb after that "lesson"
MD. Abrar - ul - Hoque (2 years ago)
This video does not teaches "time is money" rather it goes on a rant about Geometric Progression.
Francis Lai (2 years ago)
Also, inflation.
Nevermind (2 years ago)
for the example with sheela, she could have just waited a month and add on the 1k \$ she needs to get the car when she gets payed and that other guy that wanted a 100k \$ car... whell get a ceaper car you moron
Math Nerd 1729 (2 years ago)
Even if he (Timmy) compound continuously, he has to wait about 24 years!
sghaier mohamed (2 years ago)
dont use this voicer ever again !
John Luu (2 years ago)
its 2016.....
+John Luu This was made in 2014....
Andreas L (2 years ago)
Bryan Bazilauskas (2 years ago)
incorrect formula for the future value of money at 1:18 of the video. they switched the multiplication and the addition.
Viola Maria (2 years ago)
easy as pie to comprehend
Dominic Cardelli (2 years ago)
lol this is great.
Mian Fei (2 years ago)
I've enjoyed many TED-Ed videos, but THE IDIOT WHO WROTE THIS NEEDS TO BE SACKED. The interest rate is *NOT* "also known as the time value of money". The two concepts are related but far from identical. Please, TED-Ed. DELETE THIS VIDEO and make the world a less misinformed place!! Instead of asking some IDIOT consultant to write your educational videos, why not ask an actual economist to spend 10 minutes of her time to write you something that is actually correct?
Faisal Malik (7 months ago)
Mian Fei I’m not too knowledgeable about this area of study; never took any courses in this subject, but is it possible that different countries have different names for this? Maybe not, nonetheless this video is pretty low grade for TED-Ed.
Princeton Kihd (2 years ago)
agree, they should have been aware about inflation rate that keep the price of a car relatively high and if inf.rate = interest rate on a deposit then despite how many years your money is on deposit you are at the same situation as initial set up. Since i have had finance course there a lot to speak lile perpetuity/annuity/equivalent annual annuity/growing perp./annuity and a lot more if you deal with continuous deposit/bonds/stocks etc. This shit should be deleted obviously!!!
afaruky (3 years ago)
1:13 vs 2:10 It's definitely sexist
Dark House (3 years ago)
Fuck this. After 26 year that money would not worth jack shit
Raymond (3 years ago)
"You should ask Sheila for a ride to the beach." Or he could just buy the same car she bought instead of attempting to buy something that is ten times his budget.
George Cataloni (3 years ago)
With inflation, interest rates would _have_ to be 10% if you're ever going to catch up to the price of what you want to buy!
SubtleSoup (3 years ago)
The formula derivation starting from 1:10 is incorrect. The plus sign after the first PV should have switched to a multiply when the two PVs were factored out and the multiply sign after the 1 should be a plus. You can see that the swirl animation doesn't actually change either of those signs. Thus the resulting equation should read FV=PVx(1+interest) but you incorrectly show FV=PV+(1 x interest).
Shubhendu Singh (3 years ago)
Damn...This was perhaps the first ever Ted Ed Video that disappointed me.
SymbolX (3 years ago)
You forgot to consider inflation… Plus interest rates are never that high. The best I've been proposed was 3% and for some reason it became 0.3%… So, better forget giving your money to some greedy jews…
Pulchrior Evenit (4 years ago)
I finally understand it. Thank you very much.
Dat Ha (4 years ago)
Give me back 3 minutes of my life -_-
RLS0812 (4 years ago)
Over simplified.  In real life you have inflation, and taxes to worry about.  The taxes on the money gained would be 15% - 40%, while the inflation rate would diminish the purchasing power by 3% - 6% per year.
myysterio2 (4 years ago)
This video doesn't factor in inflation or depreciation :/
David Dunlop (4 years ago)
I hoped for some talk about the effect of inflation, continous work, etc. Not secondary school algebra lesson.
Nathan Carter (4 years ago)
Please edit the video to fix the following mathematical error:  At time 1:10, the equation is correct, FV=PV+(PVxInterestRate), but at time 1:12 you've manipulated it incorrectly, and written FV=PV+(1xInterestRate), when you meant to write FV=PVx(1+InterestRate).  You have the + and x reversed.
Kiar Holland (4 years ago)
They screwed up their formula "Rearranging"  at 1:10  Fv= PV + (PV*interest_rate) DOES NOT EQUAL Fv= PV + (1*interest_rate)
Medea's Biggest Fan (4 years ago)
Shelia could have haggled.
Aigars (4 years ago)
Well this was a rather simplified explanation. Where's the inflation? Where's the change in value due to new technology, demand and other factors? And what about interest rates, they can be fixed and variable and it makes investing a bit more complex...
Incredibly stupid
sageyash (4 years ago)
I think you need to create another ted ed channel aimed for childrens or for adults, videos here sometimes are  very childish, and sometimes it seems aimed toward more adult audience. It's really annoying.
Jeroen M. (4 years ago)
Inlfation is higher than interest rates these days.
Dave Mendoza (4 years ago)
Wow. I expected too much. I thought inflation rates will be considered too not to mention 10% interest rates, i mean really? What kind of bank would offer that? Pretty disappointing for a TED-Ed video.
fritt wastaken (4 years ago)
lol it didnt works that way. a year later car will cost \$11k already
Emin Nebili (4 years ago)
Hnapınapı
Robert Foth (4 years ago)
Is it just me or did they mess up the equation at 1:16? I can't tell their plus vs multiplication signs apart.
The34gl3 (4 years ago)
The way money works is just silly.
Khaled Ahmed Younes (4 years ago)
Poor Timmy :(
Michael Lee (4 years ago)
I think this video shouldn't be on TED-Ed... it should at least talk about inflation and a bunch of other factors. This is like a lie and it is not realistic at all. This would only mislead children into thinking that they can make more money when they save money in the bank. It would kill the economy and they would be losing money due to inflation being much higher than the interest rate.
loll at the beginning i tought that when she returned to the car retail store the car would cost more due to inflation... this made me lose credibility
scottbaino (6 months ago)
NoxuzBlog | Abraham Rodríguez With depreciation, the car would lose value and Sheila would make even more money
I also thought that it would be more
Marxvn (4 years ago)
I thought the car would be less even with factoring in inflation due to the ever shifting technological advances of the market?
carpo719 (4 years ago)
Worst TED video ever.
MindSponge (4 years ago)
Please tell me where I can find a bank that has a 10% interest rate! Thats a lot better than the 0.01% that I currently have at my bank.
Jacob Griffin (4 years ago)
The more expensive merchandise there is, the more greedy people get. I hope free printing replaces the economic market, that way we have lots to spare and share!
HOW LOVELY (4 years ago)
Doesn't interest take money? Please explain
MakeMeThinkAgain (4 years ago)
Inflation?
Releasethezazen (4 years ago)
Tell the kids how savings and CD interest rates are horrible in the US (0.01%), yet credit card APRs can run as high as 29.9%.  Something is fishy about that....
globalbankfraud (4 years ago)
Tell kids the truth!   You won't get 10% interest from a bank account.  Interest rates are lower than the true rate of inflation so your money is actually loosing value over time, whether it's in a bank or under a pillow.  And the US Government massages the rate of inflation in order to give a misleadingly low value.  If you want the correct metrics go to www.ShadowStats.com
Haar Megiddo (4 years ago)
Nope, time is money because you need to invest time to actually earn money and not cause of this trivial compound interest equation that can be done by a kid in school and doesn't describe even remotely how these things function in reality.
Pitchoo973 (4 years ago)
10% interest, well I'm interested !! Where can I find it ?
But money loses its value over years...gold is better (or other investment)
Andrei V (4 years ago)
Kelly Dutro (4 years ago)
What happens if you can hit the speed of light(do you travel back in time,become younger,get smaller,ext.)
Maciej Jaros (4 years ago)
Actually time is money because she earned \$10,000 in a month ;-P. And he could afford a car in just 11 months - assuming he is earing  \$10,000 each month and that he can live from e.g. his wife earnings ;-).
Theanonymous Girl (4 years ago)
It said it was a bonus, so no, she isn't earning that much in a month.
lovekeys (4 years ago)
freeNode5 (4 years ago)
who gets 10% interest?
crosbying (4 years ago)
This was the worst one so far, and it was factually wrong not adjusting for inflation or even having an actual realistic interest rate. Show me the bank that gives 10 % interest
lee mubai (4 years ago)

StiX (4 years ago)
This is only got to do with interest and compound interest. What about labor/people cost, which is what I think when people say "time is money".....Not material things like cars
tactics40 (4 years ago)
Banks effectively don't work like this unless you have much more money than Sheila has.
Compound Interest (AER).
Christy Reserva (4 years ago)
If you can't buy that car after a year, buy a cheaper but reliable one instead. So she was smart. The rest, stupid.
Angel33Demon666 (4 years ago)
This is stupid. All this tells you is how to calculate compound interest. This could by done by any student in any respectable junior high. This totally does not take into account opportunity cost, inflation, the present value of pleasure, and much more. This video is sorely lacking in depth.
m1a1jake (4 years ago)
I was going to comment, but I will just give yours a thumbs up since it basically said what I was thinking.
Gnana Prakash (4 years ago)
I'm not trying to be mean or anything but this has got to be one of the least informative and shitty videos by TED-Ed that I have watched.
Kurt P (4 years ago)
Yeah, Timmy give them your money for all those years, and then see if the inflation rate hasn't outpaced your savings rate. Obviously TED hasn't heard of NIRP
zzz (4 years ago)
Where's the inflation and the decrease value of the car throughout the year?
Not even a bit closer to content what TEDed started with in earlier vids. Downgrading their own standards.
Bryn Barker (4 years ago)
This explanation of time-value of money isn't correct. I also don't understand why they didn't show how to use the formula with the time period as the variable.
Mihir Gore (4 years ago)
This was a little too childish
GemMine (4 years ago)
+PIC32Embedded dude its childish, but beyond that everyone, even the little children know you have to factor in for inflation, and that putting your money in a bank to try and make money is a no no. your money always depreciates in a bank, unless you put it in high risk stock or something
rist98 (4 years ago)
+LordThanathos Not only that, but sometimes banks just need deposits. I've seen a 10% even 11% deposit. From a bank that is just starting out. There are no free meals. Good returns ask for risks. Even a 12% stock dividend yield return is not unreal, as I did manage to snatch a stock with that return potential. If not better. Fact is, higher risk usually means higher returns. You gotta be smart to minimize the actual risk, where other people still see risk.