What can be a consequence of ignoring the time value of money?

Ignoring the time value of money can lead to overestimating future wealth. The time value of money is a financial principle that asserts that money available today is worth more than the same amount in the future due to its potential earning capacity. When individuals fail to consider this concept, they may assume that the future value of their investments will be considerably higher without accounting for factors like inflation and compound interest.

This oversight can result in unrealistic expectations about how much money they will accumulate over time if they do not account for the time value of money's implications. For example, if someone believes they will have a specific amount saved in the future without considering the rate of return on their savings or investments, they may miscalculate their actual financial readiness for future expenses or goals. Overall, understanding the time value of money is crucial for accurate financial planning and investment strategies.