Reasons for time preference of money, Financial Management

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Q. Reasons for Time Preference of Money?

1) Future Uncertainties: One of the reasons for preference for current money is that there is a certainty about it whereas the future money has an uncertainty. There may be an apprehension that the other party (the creditor) may become insolvent or untraceable.

2) Preference' for Consumption: Most people have subjective preference for present consumption over future consumption of goods and services either because of the urgency of their present wants or because of the risk of not being in a position to enjoy future consumption that may be caused by illness or death, or because of inflation. As money is the means by which individuals acquire most goods and services, they may prefer to have money now.

3) Investment Opportunities: Most individuals prefer present cash to future cash because of the available investment opportunities to which they can put present cash to earn additional cash.


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