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
You also have to take into consideration the yearly inflation rate. Even if you get an interest of 1% from the bank each year the inflation might be around 2% each year. You will as such lose some value of your money if the inflation is higher than your interest rate. Of course, depending on the inflation, the price will also go up accordingly.
Damn, it's even lower than I last knew. I got my monies everywhere except the banks!!! And I have Never Ever regretted that decision!!! Banks are a scam!!!
Anually ? Come to Brazil, you can find it here and more, we have the highest interest rates of the world!! Our economy is shit, but at least is good for investors. But don't go to big banks, they still sucks.
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).
Both houses and cars can be miserable money pits and an endless source of headache!! Not saying to never buy them, just be very particular. And Real Estate is NOT the great investment it used to be!!
New cars are just as prone to needing repairs and maintenance as a used car (assuming it's been taken care of decently). New cars are a DUMB purchase unless you are really wealthy or something!! The very second you sign your name to the contract the vehicle automatically loses a Massive amount of its value!!! Buy one that is "almost" new that has low mileage and has been taken care of well. It will have lost a Ton of its value already and could be a really great deal and it is still nearly a New car!!!
He could have made it realistic and used 1 percent. That's still a pretty nice round number. (People too stupid to spell check "percent" either, apparently.)
I agree. The exaggerated interest rate is selling us the idea that saving money on your bank account is a good way of multiplying it, but the only one who profits from that is the bank. Usually interest rates barely cover inflation so saving money on your bank account is NOT a good idea.
Or having a reliable/diverse stock portfolio Or buying a franchise Or finding cent coins on the ground *any of these options will get you more money than the interest of the savings account(losing account)*
Here in Argentina we have around 20% interest rate on deposits..... though inflation is around 40% so, REAL interest rate is negate, but Nominal is still 20%. so, the problem is not with the interest rate, but with the car not being affected by any kind of inflation *-*
I would have thought that the phrase was referencing the money one could earn during that time. As in: I can't go to the beach today. I have to work to make money.
This is not the future value of the money. This is the future amount of money after a certain time, at a certain interest rate. The future value of her money depends on inflation and deflation, as well as the evolution of the cost of living. It also depends if she's staying in the same country, or she wants to know how many CHF her dollars will worth in a year (which is way harder to anticipate). I'm disappointed about this video (like many other people), because I can calculate how much an interest can offer since I'm ten years old. What I was expecting is an introduction on how to estimate the value of say... 1000$ in ten years. PS: if a bank proposes 10% interest, beware ! They're probably doing something illegal or risky with your money !
At this rate, I think we need to rethink the concept of Universities. I had to go to college to learn this, maybe we should make TH-cam a global university. It would reach a lot more people, with less costs, and a lot of advantages, like; learn when you are able, you didn't heard that? just push the video back a bit...
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.
For academic purposes this is just right, however for the example, this car in 5 years cost a lot less than now because of depreciation. Except for those goods that acquire value along time, such as collectibles or gold to mention a few.
This is a video on how to calculate interest rates. It is NOT a video about the future value of money. If for instance the interest rate is as it is nowadays at two percent, but the inflation rate is at three percent, as it is nowadays, you LOOSE value by saving it. (I'll totally gloss over how this is done 'on purpose'.) Any video talking about the future value of money without discussing the role of inflation is an EXTREMELY BAD video. For shame TED-Ed.
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
"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.
1: the narrator's fake accent is annoying. 2: this title is misleading. i expected how to calculate inflation. 3: they didnt take into account inflation in the lesson they did try to tell. 4: FUCKING INFLATION
Why don't they mention inflation in the video? It can make sense if you put the money in the bank for a few months, but it decreases in value the longer you put it in a bank.
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...
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.
I thought this would discuss things like 401(k) plans and other long-term investment plans, and was additionally disappointed that it disregarded the changing value of money over time.
A useful piece of math to know, however, a CD would probably be a better example than a savings account. Even if we ignore the fact that no bank in their right mind would give 10 percent interest annually on a savings account, the actual (extremely trivial) amount they *do* give seems to fluctuate rather often with changes in the market, making that nice neat math formula inaccurate since it only holds true for fixed rate investments.
goodforyou3000 70's and 80's? Well, shoot, I must have had a cheap first bank. My earliest banking memories (probably somewhere in the mid 70's) it was 6%-8%. And of course today, with lending rates so low, savers get a few crumbs instead of a slice of the pie. Still, it does show how rates fluctuate so much that a savings account may not be the best demonstration for fixed rate interest growth.
What about inflation? How should it come into play here? I don't think the car will still cost $11,000 after one year. I think inflation is important to be considered to find the value of time
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.
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?!?
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: www.globalfinanceschool.com/blog-post/time-value-money
Unsubscribe and shut the fuck up. I have had it with European shit heads commenting on every video with comments like this. FYI they teach it in grade school in the US too.
I blame them for poorly selected age group for this video, like you said, it's clearly for kids, which only a small small portion is interested in this kind of thing, Hell, even some adults aren't interested in this. Also my thought about video content, is my opinion on how to make this more interesting for kids. :)
I love it how they don't mention the reality of tax, if i got 10% return after tax i would be a millionaire in 20 years. the time value of money is really just 5%, after that you start taking on the risks of market downswings
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
I thought the car would be less even with factoring in inflation due to the ever shifting technological advances of the market?
I also thought that it would be more
one at a time boy
Hahah so true
Same here, I thought car was 8000$ because of deflation😂
I love how they just ignored inflation.
just to show how compounded interest works. Cuz in real life a little inflation won't matter when that whole cars value drops by 80% in 26 years
😅
😂😂😂😂😂
I love how this is assuming a 10% interest rate on deposits
😂
You also have to take into consideration the yearly inflation rate.
Even if you get an interest of 1% from the bank each year the inflation might be around 2% each year. You will as such lose some value of your money if the inflation is higher than your interest rate.
Of course, depending on the inflation, the price will also go up accordingly.
And the inflation was ? In 2022?
Wife: where are you going?
Timmy: I'm riding Sheila... I mean I'm riding WITH Sheila to the beach
i'd love 10% interest, if it existed.
they should talk about why a so called "high yield interest" saving account is only .95% these days.
It exists if you owe the bank money - on my bank it's 15% or so
Damn, it's even lower than I last knew. I got my monies everywhere except the banks!!! And I have Never Ever regretted that decision!!! Banks are a scam!!!
Anually ?
Come to Brazil, you can find it here and more, we have the highest interest rates of the world!! Our economy is shit, but at least is good for investors. But don't go to big banks, they still sucks.
I paid my bank 32 per cent interest per annum on the personal loan. In India. :-(
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).
Exactly. Though the second formula (2:06) was shown correctly
Lol what the value of the car would drop by the next year because buying brand new cars is stupid. They don't hold their value.
The car was just an example.
classic20
a very bad one.
with all the money you're eventually going to end up spending on repairs for a used car, you might as well buy new.
Both houses and cars can be miserable money pits and an endless source of headache!! Not saying to never buy them, just be very particular. And Real Estate is NOT the great investment it used to be!!
New cars are just as prone to needing repairs and maintenance as a used car (assuming it's been taken care of decently). New cars are a DUMB purchase unless you are really wealthy or something!! The very second you sign your name to the contract the vehicle automatically loses a Massive amount of its value!!! Buy one that is "almost" new that has low mileage and has been taken care of well. It will have lost a Ton of its value already and could be a really great deal and it is still nearly a New car!!!
I think this was an excellent explanation of some of the math behind compound interest.
I thought this video would account for inflation -_-.
Ten percent in one year? Seems legit
"Ten perceint in one year" is an example, people is too stupid to figure that out by themselves huh?
He could have made it realistic and used 1 percent. That's still a pretty nice round number.
(People too stupid to spell check "percent" either, apparently.)
I agree. The exaggerated interest rate is selling us the idea that saving money on your bank account is a good way of multiplying it, but the only one who profits from that is the bank. Usually interest rates barely cover inflation so saving money on your bank account is NOT a good idea.
Or having a reliable/diverse stock portfolio
Or buying a franchise
Or finding cent coins on the ground
*any of these options will get you more money than the interest of the savings account(losing account)*
Here in Argentina we have around 20% interest rate on deposits..... though inflation is around 40% so, REAL interest rate is negate, but Nominal is still 20%. so, the problem is not with the interest rate, but with the car not being affected by any kind of inflation *-*
I love this channel. It tackles educating people bout random things of the world while being entertaining for everybody of any age.
incorrect formula for the future value of money at 1:18 of the video. they switched the multiplication and the addition.
Timmy will get more bonuses in the future, won't he?
not in this economy - more likely he will lose his job...
NoName NoFame wow why do u say this
Sean Dafny because it's the truth
People are complaining about lots of stuff, and I just want to add that the formula they're showing at 1:10 is wrong.
I think that the lesson was amazing, but why didn't Timmy choose a less expensive car?
inflation
No, time is life. Money is money.
I would have thought that the phrase was referencing the money one could earn during that time.
As in: I can't go to the beach today. I have to work to make money.
This is not the future value of the money. This is the future amount of money after a certain time, at a certain interest rate.
The future value of her money depends on inflation and deflation, as well as the evolution of the cost of living. It also depends if she's staying in the same country, or she wants to know how many CHF her dollars will worth in a year (which is way harder to anticipate).
I'm disappointed about this video (like many other people), because I can calculate how much an interest can offer since I'm ten years old. What I was expecting is an introduction on how to estimate the value of say... 1000$ in ten years.
PS: if a bank proposes 10% interest, beware ! They're probably doing something illegal or risky with your money !
Time=money
ATM machine=time machine
At this rate, I think we need to rethink the concept of Universities. I had to go to college to learn this, maybe we should make TH-cam a global university. It would reach a lot more people, with less costs, and a lot of advantages, like; learn when you are able, you didn't heard that? just push the video back a bit...
Except what would be the standard of learning and what would motivate people to actually learn.
I honestly learned this in sixth grade math...
mikelmanson how long did it take you to figure this out?
then when you're done, put TH-cam academy at your cv you'll get a lot of job interviews!
So what should timmy do ? Gamble??
Is it just me or did they mess up the equation at 1:16? I can't tell their plus vs multiplication signs apart.
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.
I was going to comment, but I will just give yours a thumbs up since it basically said what I was thinking.
It's compound interest explained. Not sure what this 'time value of money' title has to do with it.
For academic purposes this is just right, however for the example, this car in 5 years cost a lot less than now because of depreciation. Except for those goods that acquire value along time, such as collectibles or gold to mention a few.
Gold never changes value. It constantly stays exactly the same. Money changes value.
This is a video on how to calculate interest rates. It is NOT a video about the future value of money.
If for instance the interest rate is as it is nowadays at two percent, but the inflation rate is at three percent, as it is nowadays, you LOOSE value by saving it. (I'll totally gloss over how this is done 'on purpose'.) Any video talking about the future value of money without discussing the role of inflation is an EXTREMELY BAD video.
For shame TED-Ed.
Man Addison Anderson sounds so damn different
OMG, I didn't notice it was Addison Anderson's voice!
hoooooold up, there is a bank offering 10%? compound interest?
Timmy don’t get a ride with Sheila! She doesn’t understand _the speed limit_
more content on banking
Now show us how the interest accumulates on a mortgage loan.
The formula should be FV=PV * (1+ interest rate) to the power of n.
I love how this is assuming a 10% interest rate on deposits
Wait it says that the car that sheila bought was on sale, does that mean it was on sale for a year
She could just buy the convertible second hand and in a years time it would cost only $7500
I should have had deposited money, ten years ago
don't you have to compensate for inflation when determining your moneys value. + 10% safe interest good luck finding that any were
All these assumptions break down with negative interest rates
m sorry but how coul sheila uy a car and Timmy cant then they have same amount in backwith same interest
I can tell that the narrator for this one is the same, he acts Well!
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
"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.
1: the narrator's fake accent is annoying.
2: this title is misleading. i expected how to calculate inflation.
3: they didnt take into account inflation in the lesson they did try to tell.
4: FUCKING INFLATION
Why don't they mention inflation in the video?
It can make sense if you put the money in the bank for a few months, but it decreases in value the longer you put it in a bank.
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...
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.
This video is not saying support corrupt banks. It's really just explaining the maths behind a highly theoretical and unrealistic example.
I thought this would discuss things like 401(k) plans and other long-term investment plans, and was additionally disappointed that it disregarded the changing value of money over time.
This video does not teaches "time is money" rather it goes on a rant about Geometric Progression.
A useful piece of math to know, however, a CD would probably be a better example than a savings account. Even if we ignore the fact that no bank in their right mind would give 10 percent interest annually on a savings account, the actual (extremely trivial) amount they *do* give seems to fluctuate rather often with changes in the market, making that nice neat math formula inaccurate since it only holds true for fixed rate investments.
not in today's economy, but in the 1980s-1970s double digit interest rates were common place
goodforyou3000
70's and 80's? Well, shoot, I must have had a cheap first bank. My earliest banking memories (probably somewhere in the mid 70's) it was 6%-8%. And of course today, with lending rates so low, savers get a few crumbs instead of a slice of the pie. Still, it does show how rates fluctuate so much that a savings account may not be the best demonstration for fixed rate interest growth.
What about inflation
I hoped for some talk about the effect of inflation, continous work, etc. Not secondary school algebra lesson.
What about inflation? How should it come into play here? I don't think the car will still cost $11,000 after one year. I think inflation is important to be considered to find the value of time
Who is still watching this video after 6 years? Hit like!
This is very informative. Great video!
thanks
bus is pretty cheap..... that's savage....lol
Question: With the current rate of inflation and the current interest rate.. in absolute value, would you actually earn or loose money by saving?
Depends on your bank and national inflation rate
Compound Interest (AER).
00:53
... no actual notion. Just a course of high school Maths!!!
I knew this since I was five. Also you guys should had added in the price of inflation!!! The market price for everything goes up a lot faster.
Also: careful about inflation and deflation
Where's the inflation and the decrease value of the car throughout the year?
Great
Now add inflation to the mix and chances are that even Sheila won't be able to afford the cheaper car after a year, two, three... 26 years.
This video sponsored by Bank of America.
Since bank accounts barely make any money.
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.
They screwed up their formula "Rearranging" at 1:10
Fv= PV + (PV*interest_rate) DOES NOT EQUAL Fv= PV + (1*interest_rate)
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.
I thought the video would contrast it with inflation.....
I thought I would learn something
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?!?
2-3%? The highest interest rate I've seen in my life was 0.4%.
wtf 2-3 percent thats wayyy too fucking high thats 2-3 mil per year with a billion dollars what
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.
The first time I haven't learned anything from a TED video
Surely the price of Timmy's car would have gone down with time
Wait's 1 year for a car, the car ends up looking like garbage
this sounds like something from the 50s
I LOVE THIS VID
specially when the quality is at
144 - 244p it looks like real cartoon :)))))
What happens if you can hit the speed of light(do you travel back in time,become younger,get smaller,ext.)
Hey economic geniuses - this video is meant for KIDS.
I think that is important to talk about inflation. Maybe the interest rate isn't enough to compensate de inflation.
At 1:10 I think someone confused the future value equation with the compound interest equation
Problem is, come back a year later and the price of the car (or w/e) has also gone up b/c of our lovely friend, inflation. :/ Money sucks.
After he asked for 5 years it should have been stopped and asked how many years would it take and then show how to solve the equation in reverse.
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:
www.globalfinanceschool.com/blog-post/time-value-money
Timmy needs a passive income.
What about inflation? She wouldn’t be able to afford the car next year because the price would. It’s proportional
I finally understand it. Thank you very much.
10% interest, well I'm interested !! Where can I find it ?
so this is basic math education here in germany, why is there a video about it?
It is basic math pretty much anywhere. This video is obviously aimed for a younger audience
Unsubscribe and shut the fuck up. I have had it with European shit heads commenting on every video with comments like this.
FYI they teach it in grade school in the US too.
Kids don't care at all about banks or deposits... Bad video. I thought it will be a video about currency values and why they change and so on.
You are blaming them for your expectations? You must be a pleasant person to hang with
I blame them for poorly selected age group for this video, like you said, it's clearly for kids, which only a small small portion is interested in this kind of thing, Hell, even some adults aren't interested in this. Also my thought about video content, is my opinion on how to make this more interesting for kids. :)
Rip Timmy
Nicely done. This vid really shows how bank deposit could work, but it DOESN'T lol.
She got 10,000 pay check and the car is 11,000 doesn’t she have at least 1,000 pound
there's a reason we don't make educational videos in the same style we did in the 60's
Its a shame my local banks don't offer enough interest for me to deposit and earn. Even CDs are bad : (
Over simplified to be almost nonsensical.
Damn...This was perhaps the first ever Ted Ed Video that disappointed me.
Even if he (Timmy) compound continuously, he has to wait about 24 years!
I love it how they don't mention the reality of tax, if i got 10% return after tax i would be a millionaire in 20 years. the time value of money is really just 5%, after that you start taking on the risks of market downswings