Double Your Money! The Rule of 72...

What is the Rule of 72?

The Rule of 72 determines how long a certain investment will take to double at a fixed annual interest rate. You can roughly estimate how many years it will take for your initial investment to duplicate by dividing 72 into the annual rate of return.

For example, at an annual rate of return of 12% it will take 6 years to double your money, see calculations below;

72 / 12% = 6 years

Using the formula above, if you put your money in the bank with 1% annual rate of return you will need 72 years to double that money. Oh my!

For comparison, let's say you have an initial investment of Php100,000. You are ask to choose what annual rate of return you want to receive, you are given 4%, 8% and 12%. Looking at the table below you can compare how many years will it take to double your money;

Did you notice the difference between Php400,000 at 4% rate of return with that of 12% when you reach the age of 61, it's Php6,000,000. That's is equivalent to 20 years salary of a person earning Php300,000 per year or Php25,000 monthly.

The Wider Perspective

For some people, the number of years to double their money seems like a long waiting time. Somehow, it is, but this is where the power of compounding interest comes in. Albert Einstein once quoted, "Compound Interest is the eight wonder of the world. He who understands it, earns it...he who doesn't, pays it."

Looking at the above table again, at 12% annual interest rate you've invested Php100,000 and by the time you reach the age of 61 you already have Php6.4 Million, not bad at all.

And here's the catch, if you add  more money to your Php100,000 continuously, the rate of compounding immensely increases.

In addition to this, the earlier you start to invest your hard earned money even just a small amount it will provide more time for your money to multiply. Keep in mind that time can be your greatest asset or worst nightmare. It is you and always you who have control over your future. Choose to act now!


P.S.
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