The Most Valuable Money You’ll Ever Earn: The Rules of 72 and 115

How long will it take for my investments to grow?

This is a question a lot of people wonder about and fortunately, we can use some simple rules to figure it out.

The Rule of 72

The Rule of 72 helps determine how long it will take for your money to DOUBLE.

To figure out how long it will take your money to double, take the number 72 and divide it by the projected rate of return on your investment. The answer represents the number of years it will take for your money to double.

For example: Pat invests $1,000 in a mutual fund that has averaged 7.2%. If it continues to average 7.2%, it will take 10 years for Pat’s money to double (72 ÷ 7.2 = 10).

So, if you are 20 years old and you invest $1,000 in an investment that returns 7.2%, let’s look at what happens as you get older and the money compounds:

• Original investment (20 years old): $1,000
• 30 years old: $2,000
• 40 years old: $4,000
• 50 years old: $8,000
• 60 years old: $16,000

WOW! This also doesn’t consider how much you might be adding to your investments. It only shows what happens if you invest $1,000 one time and stop. What this means is that:

The most valuable money you will ever earn, is the money you earn and invest today!

The Rule of 115

As you might guess, the Rule of 115 helps determine how long it will take for your money to TRIPLE. To use our earlier example, Pat invests $1,000 in a mutual fund that has averaged 7.2%. If it continues to average 7.2%, it will take 16 years for Pat’s money to triple (115 ÷ 7.2 = 16).

So, if you are 20 years old and you invest $1,000 in an investment that returns 7.2%, let’s look at what happens as you get older and the money compounds:

• Original investment (20 years old): $1,000
• 36 years old: $3,000
• 52 years old: $9,000
• 68 years old: $27,000
• 84 years old: $81,000

Wealth-building action step:

Start saving money today!

For more financial tips, visit www.feedthepig.org