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Have you ever wondered
how long it will take to double your money when you invest it? There’s a simple calculation you can make to find out.
It’s called the “rule of 72.” Just divide 72 by your rate of return. For example, if you are earning 8%
on your investment, it will take 9 years to double in value (72 divided by 8). The rule of 72 assumes that you reinvest your
earnings, and it doesn’t take income taxes into account.
The rate of interest you earn on investments can drastically
affect your long-term goals. For example, an account earning 3% interest will double in 24 years. But earning a 6% return
on your money will cut the time in half to 12 years.
You can also use
the rule of 72 to calculate what rate of interest you need to earn to double your money in a certain number of years. Simply
divide 72 by the number of years remaining. Say you have 10 years to turn $5,000 into a $10,000 college fund. You’ll
have to earn at least 7.2% interest to achieve your goal.
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