At the core of building long-term wealth is the fundamental concept of the time value of money due to inflation — a dollar today can buy more than dollar tomorrow.
For example, from 1966 to 1982 the U.S. experienced high inflation that averaged around 7% annually. To put this into perspective, $1 in 1966 was worth only $0.34 by 1982 — the dollar lost about 66% of its purchasing power in those sixteen years! An investor would have needed an after-tax return above the inflation rate just to preserve purchasing power, and more still to grow wealth during that period.
If you have 5% annual inflation, then you’d need a $105 to buy something that cost $100 a year ago. So, $1 today would have a same purchasing power as $0.95 a year ago. Time value of money leads to many concepts like present and future values, Internal Rate Of Return and Discounted Cash Flow.