What is £1 worth today ?

... well, clearly it's £1 !

What is £1 worth in a year's time ? ... welllll, assuming the entire nation doesn't go bankrupt (wild assumption 1)... and that interest rates remain above 0 (wild assumption 2), it is going to be worth more than £1.

If you can invest your £1 and gain interest, then in a year's time it will be worth 1*(1+Interest Rate). Put another way round... If you were to give £1 to a friend for a year, you'd expect more back after a year cos they can use your money during that year and you cannot. The amount extra they give you is the interest.

The amount of money you have at the end of the year is called the Future Value. So if you invest £1 at 6% interest for a year, in a year's time, it grows to £1.06 Here's what it looks like in Excel:

Download my spreadsheet that allows you to enter values, calculates future values, and compares vs Excel's FV function

Training Video on Future Value: