Sunday, 29 January 2012 16:09
by
Jacki
Earning interest on your money is a great way to watch your savings grow! Have you ever wondered how long it would take for you to double your savings? The Rule of 72 says that to find the number of years required to double your money at a given interest rate, you divide the interest rate into 72.For example, if you want to know how long it will take to double your money at eight percent interest, divide 8 into 72 and get 9 years. This formula also works backwards. If you want to double your money in six years, just divide 6 into 72 to find that it will require an interest rate of about 12 percent.Below you will see that your money will double more quickly at higher interest rates.
|
% Interest Paid |
|
Number Years to Double |
| 72 divided by |
2 |
equals |
36 |
| 72 divided by |
3 |
equals |
24 |
| 72 divided by |
4 |
equals |
18 |
| 72 divided by |
5 |
equals |
14.4 |
| 72 divided by |
6 |
equals |
12 |
| 72 divided by |
7 |
equals |
10.3 |
| 72 divided by |
8 |
equals |
9 |
| 72 divided by |
9 |
equals |
8 |
| 72 divided by |
10 |
equals |
7.2 |
| 72 divided by |
11 |
equals |
6.5 |
| 72 divided by |
12 |
equals |
6 |
The Rule of 72 assumes that the interest is compounded annually. If the interest is compounded more frequently, it will take less time to double your money.
Does this concept help you visualize a savings goal?
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