A promise of money in the future is worth less than the same amount today. Find out exactly how much a future sum is worth right now — and make smarter decisions about any financial offer, investment, or payment plan.
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Present Value CalculatorResults update as you move the sliders
Future amount (what you will receive)$50,000
The amount of money promised or expected at a future date
Discount rate (opportunity cost)8%
The return you could earn elsewhere. Use the S&P 500 average of 10% for equity investing, or your savings rate for a conservative view
Years until you receive it10 years
How long until you actually receive the future amount
Future amount
$50,000
in 10 years
←
Discounted at 8%/yr
Present value today
$0
in today's money
Present value0% of future amount
Move the sliders to see what your future money is worth today.
How discount rate affects present value
Rate
In 5 Years
In 10 Years
In 20 Years
In 30 Years
Understanding present value
Why a dollar today is always worth more than a dollar tomorrow
Present value is one of the most important ideas in all of finance, and it is simpler than it sounds. It answers one question: if someone promises to give me money in the future, what is that promise actually worth to me right now?
The reason a future dollar is worth less than a present dollar is opportunity cost. If you had the money today, you could invest it and earn a return. A dollar you receive in ten years has missed ten years of compounding. Present value discounts the future amount by the return you could have earned during the wait.
This concept is used everywhere in finance, from pricing bonds and annuities to evaluating business acquisitions and insurance settlements. When someone offers you a payment plan instead of a lump sum, or when a pension promises you a monthly income in retirement, present value is how you figure out whether that offer is actually worth what it appears to be worth.
The discount rate
The discount rate is the rate of return you could earn if you had the money today. If you could earn 10% per year in the stock market, then any future payment should be discounted at 10%. A higher discount rate makes future money worth less today. A lower rate makes it worth more. Use the rate that reflects your real investment alternatives.
Real world uses
Use present value when evaluating any payment that involves waiting. A structured settlement offering $100,000 in five years. A bond paying you $1,000 per year for ten years. A business deal that will pay out over three years. A pension that starts at 65. In all of these cases, the numbers on paper are not the same as the value in your hands today.
PV vs FV
Present value and future value are two sides of the same coin. Future value asks: if I invest money today, what will it be worth later? Present value asks the reverse: if I will receive money later, what is it worth right now? The Future Value Calculator on this site handles the first question. This one handles the second.
Frequently asked questions
What people ask about present value
What is present value in simple terms?+
Present value is how much a future sum of money is worth right now. If someone promises to pay you $10,000 in five years, the present value of that promise might be $6,800 today, depending on the interest rate you use. The gap between $10,000 and $6,800 represents what you lose by having to wait, because if you had $6,800 today you could invest it and it would grow to $10,000 on its own. Present value makes it possible to compare money at different points in time on equal terms.
What discount rate should I use?+
The discount rate should reflect what you could earn if you had the money today instead of waiting. If you would invest it in an S&P 500 index fund, use 7 to 10%. If you would put it in a high-yield savings account, use 4 to 5%. For business decisions, the discount rate is often the cost of capital, typically 8 to 12% for most small businesses. The key is to use a rate that reflects your real alternatives. Using a higher rate makes future money worth less today and makes you a tougher evaluator of future promises.
How is present value different from future value?+
Future value moves forward in time: you start with money today and calculate what it grows to. Present value moves backward: you start with money in the future and discount it to find what it is worth today. They use inverse formulas. PV = FV divided by (1 + r)^n. FV = PV multiplied by (1 + r)^n. Both are based on the same core idea, which is that money has a time value and a dollar today is always worth more than a dollar in the future.
When would I actually use this calculator?+
Use this any time someone offers you money that involves waiting. A lawsuit settlement paid out over five years. A real estate deal that pays in three instalments. An annuity that starts at retirement. A bond that matures in ten years. A salary negotiation where you are comparing a smaller immediate raise to a larger future bonus. Any time there is a gap between when money is promised and when you actually receive it, present value helps you understand what that promise is actually worth today.
Does inflation affect present value?+
Yes. Inflation is one reason why future money is worth less. When you use a discount rate that already accounts for expected inflation, your present value calculation is already inflation-adjusted. If you use a nominal rate like 8%, you are discounting for both the opportunity cost of capital and inflation together. If you want to calculate real present value, use a real rate, which is approximately the nominal rate minus inflation. In a 3% inflation environment, a nominal 8% rate implies a real rate of about 5%.
Why this matters
Every financial decision involves time
Understanding present value changes how you evaluate every financial offer that involves waiting. A pension, a payment plan, a bond, a business deal, a lottery payout structured over twenty years — none of these should be taken at face value. Present value is the tool that strips away the illusion of large future numbers and tells you what something is actually worth to you today.
This is one of the most powerful concepts in finance and one of the least taught. Now you have it.
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