Deeper Dive in The Rule of 72 Part II

In part one the example of a 14 year old who invests $5000 one time of the money earned while babysitting showed the power of compounding over a long period of time. Of course as effective as it to invest one time for a long period of time is the most effective way to make use of this is to do the same process multiple times .

Parcheesi with 72 Spaces

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Deeper Dive in The Rule of 72 Part I

Previously I went over briefly the Rule of 72. After going the rule over with a few people in the last couple of weeks it seems the power of the tool is lost until it is applied in a personal finance context. The math behind the rule is simple. The number of 72 is divided by the interest rate of an investment equals the time in years the money will double.


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Games with the Number 72…

Rule of  72 Game

Parcheesi – A game with 72 spaces from start to home

The name of the game which involves number 72 is not Parcheesi which has 72 spaces from start to finish. I’m referring to the game of “How long does it take to Double your Money“.  It is a game that has only one rule… The rule of 72.

When you invest to determine when your money will double you need to know a couple of things. The first is what interest rate are you getting? The second is you need to know the rule of 72. This is useful in figuring out what is a good investment or a not so good investment.