Rule of 72
If you have not heard, Rule of 72 was invented by Albert Einstien and he calls this rule the “8th wonder of the world.”
What is the Rule of 72? It has to do with compound interest. The rule allows you to easily calculate how soon your money will double given an interest rate.
For example, if you have a Cash Deposit that is paying 6% interest rate annually, and you reinvest the interest back to the CD, it will take you 12 years for your money to double. The number of years your money will double is derived by dividing the interest into 72. In this example, the CD is paying 6%, therefore, 72 / 6 = 12 years. The important thing to know is that you must reinvest your interest for this compounding effect to work.
Tags: Personal Finance
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Steven Chang » true wealth today Said,
May 31, 2005 @ 4:52 pm
[…] vest the interest back to the CD, your $10K will grow into $20K in approximately 18 years (Rule of 72). This is the power of time and compound interest. A 20 year old man who invests $10K i […]