Money devalues in real terms over time, despite its nominal value remaining the same. First, let us consider the difference between the nominal and real value of money:

• The nominal value is the face value that appears in writing on the note or coin. A single rand is still called "one rand" in a year's time - the nominal value does not differ over time.
• The real value, however, does change over time: the real value represents the purchasing power of money and decreases in an inflationary environment. Thus, R1 will buy less next year as a
  result of inflation during the year. The consumer price index measures the diminishing purchase power of our currency year on year. Secondly, let us consider the difference between accumulation in
  value money and the discounting of money: When money grows in amount, it is said to be accumulating;
• When it reduces in amount, it is said to have been discounted.
  

The principle of accumulation R1 000 invested at 10% (simple interest) for a period of one year
with an interest-paying institution, will cause your initial investment to accumulate to R1 100. This means that 10% of the principle investment - R1 000 in this case  has been added to the principal investment to derive a new, higher value of R1 100. The return in this instance is 10% - adding R100 to the principal investment. In this example, the interest is added to the principal sum once and
at the end of the investment period of one year. When this method is employed, it is said to be simple by definition. The real world does not apply simple interest, however. Property investors calculate in terms of compound interest, which involves adding the interest earned at regular intervals to the (previous) principal, thus allowing the investor the benefit of obtaining interest on an increasingly higher principal and hence, an effectively higher interest rate. This means that R10-million, invested at 10% per annum compounded, yields more than if it were to be invested at 10% per annum applying simple interest.