Have you ever wondered how long it would take your money to double? There is a guideline to figuring out the time called the "rule of 72." How you calculate it is by taking the amount of interest you are earning and divide it into 72. For instance, if you were earning 9% interest you would take 72 and divide it by 9.
72/9 = 8 periods
So at a compound interest rate of 9%, you would double your money in 8 compounding periods, which is usually measured in years.
Back in 1791 Ben Franklin left $5,000 to the city of Boston and instructed them to let it grow for 100 years. In 1861, it had grown to $322,000. During that year, they decided to build a school with most of the funds, but set aside $92,000 for 100 more years. In 1960, the $92,000 had grown to $1,400,000. It's unlikely that you will have 100 years to let your money grow, but the rule of 72 can help you see how long it would take money to double. Below is a sampling of interest rates and how long it takes to double.
Interest Rate | Years to Double |
0.5% | 144.0 |
1.0% | 72.0 |
3.0% | 24.0 |
5.0% | 14.40 |
7.0% | 10.286 |
9.0% | 8.0 |
12.0% | 6.0 |
Wishing You Wealth in all Greatest Forms,
Alex
1 comment:
So if inflation is 3%, then any cash not earning interest devalues by half every 24 years.
Meaning an investment earning 4% interest would double its (inflation-adjusted) value after 72 years.
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