rule of 72

According to Albert Einstein (1879 - 1955) "Compound interest is the marvellous invention" of human kind. It can work for you, or against you. When you invest, it works for you. When you borrow, it works against you!

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The rule of 72 says that in order to find the number of years required to double your money at a given interest rate, you can just divide the interest rate into 72. For example, if you want to know how long it will take to double your money at two percent interest (average annual interest rate of banks), divide 72 by 2 and you will get 36 years. Too much waiting period right? But that's the reality.

The rule of 72 is really accurate, as long as the interest rate is less than twenty percent.

You can also do it backwards. If you want to double your money in six years, just divide 72 by 6 and you find that it will require an interest rate of about 12 percent. Get it?

Remender: "It's not how much money you make but how much money you save"


Anonymous said...

hi red! =) it's been a while since i last visited your blog. sorry about that. was really busy..

i like this post. remembered my financial management class. i guess we could all use the tips you shared here. hope all is well!
happy weekend!


cruise said...

wow kapag mayaman ka na huwag mo kaming kalilimutan ha...

trishaaaaaa said...

hmm. i first heard about this rule was when i attended a seminar for citibank like few days ago. hehe. cool.