The Time Value of Money
by Tammy Harrison

As a personal finance major in college, I learned what financial experts deemed the time value of money (also known as present value) in my first finance class. I learned the definition as well as the mathematical equation for determining how much your money was worth over time. In basic terms, there is a formula used to determine that a dollar today is worth a dollar plus interest over time.

But, did you know that the definition of the time value of money changes when you enter parenthood?

I am talking of the same time value of money, but in a different light. I had exactly 55 minutes yesterday to do our grocery shopping for the week before I had to pick my daughter up from school. As if the time factor was not putting enough stress on me, I also had two children to get in and out of car seats and shopping carts as well as make happy enough to allow me to concentrate on shopping and not on disciplining.

Under normal circumstances, I am a careful shopper. I usually frequent one of two grocers as well as my local discount store. I buy food at the grocery store and paper products, diapers and cleaning supplies at the discount store. I use coupons if I have them, I buy extra product that we use if it is on sale, and I am not an impulse shopper. 

My week has been hectic, and I could not fit a trip to both the discount store and the grocery store in one week. Unfortunately, I had to decide whether we needed to eat or go without toilet paper for the weekend. Upon careful consideration, I decided to bite the bullet and buy all that we needed at the grocery store. 

I must tell you that I cringed, cried and had a full 24 hours of guilt after my purchases! I spent nearly $20.00 more at the grocer for paper towels, coffee, toilet paper and tea bags than I would have spent if I had gone to the discount store. Then, after reviewing my receipt closer, I realized that I did make some fine purchases that amounted to over $12.00 in savings (including $.89 per gallon of milk). Once I calmed down, I deduced that I had spent roughly $8.00 more by purchasing everything at the grocery store than if I had followed my usual shopping patterns.

This is where the time value of money enters parenthood. It takes me 40 minutes of driving, in light traffic, to get to and from town. That means, I would have had to allot at least 90 minutes extra to shop at both stores. That comes out to be an hourly rate less than the minimum wage! So, instead of multiplying the present value of my dollar by the interest and the time (the basic formula to determine the time value of money) - parents must also figure in the time away from their family to come up with a correct figure. I have determined that I can afford the extra $8.00 (this week) in order to pick my daughter up from school on time and to spend that extra time with all the kids. 

Yes, the time value of money is an important tool to be used for retirement, college and investment savings but once you become a parent, you have to determine how much your time is worth to your children as well. Me? I am convinced that all of this time spent with my children is invaluable now and will someday bring much better results than a mere $8.00 can account for!

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