The rule of 72 teaches that money can work for you or against you.
Albert Einstein said: “Compound interest is the greatest mathematical discovery of all time. It’s the eighth wonder of the world. He who understands it, earns it – he who doesn’t, pays it.”
The rule of 72 states that if you divide the interest rate by 72 you will get approximately how long it will take for your money to double. When you save or invest, money can work for you. Let’s look at how this works and how your interest rate can make all the difference in what your return will be.
If on the day you were born your parents put $10,000 into a savings account, and that lump sum yielded a 1% fixed interest rate, you’d have around $20,000 waiting for you when you turned 72. If the interest rate was 4%, you’d have $168,423. What do you think the value would be at 8%? Would it surprise you that you’d have $2,549,825. That’s 15 times more money by simply doubling the rate from 4% to 8% over your lifetime.