October 29, 2014
Compound interest is a powerful thing. What is the rule of 72 and why is it important to understand it?
Compound interest is a powerful thing. What is the rule of 72 and why is it important to understand it?
The rule of 72 is a formula to quickly figure the rate at which your money will grow, you take 72 and devide it by the interest rate that you are getting and that is how many years it will take for your money to double. Lets say you are making 8% with your stocks on average because your pretty good with them and you invest in no load index funds. Your money would double every 9 years at that rate. Or lets say you have your money in a CD at Welsfargo making .05% a year. Your money would double every 1440 years. You need to know what rate your money will grow at if you have plans for that money, if you are trying to grow your money in the bank you need to know it will not grow faster then inflation.
That was another great answer, Garrett. I have nothing else to add.