The Rule of 72: How to Double Your Money Like It Ain’t Even Funny!
Our society is really lacking in its financial literacy. In other words, we’re failing in our financial education. And the fact is, though our school system generally does not teach it to our kids, many parents don’t know enough to teach their kids either. So, this is one area where we all have to become self-educated. So, let’s get smart!
Today, we’re going to go over a fundamental financial principle that we all need to know. The concept we’re about to show you may be the key difference in your financial life.
Have you ever wondered how you could double your money without doing anything? Well, I’m about to show you how. But before this will actually work, you do need some money to start out with. So for those of you are having trouble finding two nickels to rub together, the IW team will exclusively grant you $10,000 (which will magically disappear after you finish reading this article!). And for those of you who already have $10,000 of real money…well, we’re not mad…we’ll still let you participate.
Seriously…
It’s called the Rule of 72
The Rule of 72 is the formula that will give you the amount of time it takes for your money to double. In order for our money to double, it must provide a rate of return or return on investment. This is also known as an interest rate. So, here’s the formula:
72 DIVIDED by (Rate of Return) = # Years to Double Your Money
You divide the number 72 by the interest rate you receive on your money. The answer is the number of years it takes to double your money. For example, if you are getting an interest rate of 4%, you will divide 72 by 4, which equals 18. This means it will take 18 years for your money to double if it gets 4% interest.
Are You Ready to Double Your Money??
Now pull out that $10,000 we gave you so we can double it! I’m going to need you to blow the dust off of your math skills and work with me here. Remember, divide the number 72 by the rate of return.
Question:
How long will it take your money to double with a 6% rate of return?…72 divided by 6 equals…..
12. The answer is 12 years!
OK, now that you’ve got it down here’s a few examples of what your $10,000 could do…
6 % RATE OF RETURN
| $$$ | |
| NOW | $10,000 |
| 12 yrs | $20,000 |
| 24 yrs | $40,000 |
9 % RATE OF RETURN
| $$$ | |
| NOW | $10,000 |
| 8 yrs | $20,000 |
| 16 yrs | $40,000 |
12 % RATE OF RETURN
| $$$ | |
| NOW | $10,000 |
| 6 yrs | $20,000 |
| 12 yrs | $40,000 |
And you don’t need $10,000 to do this. $100 will double too. $50 also works. Any amount of money will work! You just need to focus on getting a favorable rate of return and giving your money time to grow.
Cha-Ching!!
It’s easy to get a rate of return of 1%. The average checking account has an interest rate of less than 1%. So, that’s not too challenging. It is more challenging, however, to get higher rates of return such as 6, 9, or 12 percent. And it is possible to get much higher rates of return than 12 percent. By increasing our financial education we’ll find the opportunities to do so.
Now that you know how simple it is to double your money, work on increasing your financial intelligence so that can do it!
