Читать книгу Family Financial Freedom - Floyd Saunders - Страница 7

I have found that not very many people understand the value of compounding when it comes to money. What you could double the rate of return on your investments? Would you money double in half of the time?

There is a simple formula that you can use to help you measure how successful you can be with your money, the “Rule of 72”. This is a really simple way of estimating how long it will take to double your money. Simply stated, you divide 72 by the interest rate you might be earning on a potential savings account or investment.

So it’s, 72/ interest rate = # of years before your money doubles.

Let’s take something simple, like the interest rate of a savings account. Today you might get two percent. So 72/2 = 36. That means if you make a one-time deposit of $1,000 into a passbook savings account and do nothing else, in 36 years you would have $2,000 dollars.

Now let’s apply that same rule to a stock mutual fund (an investment in the stock of a number of companies). The average mutual fund over several years will earn about 7 to 8%. So what’s happens if we can get an 8% return on our investment in a mutual fund? (Impossible you say, but for the moment trust me). 72/8 = 9. Your same $1,000 grows to $2,000 in just nine years.

Use the rule of 72 as a guideline to help you make decisions about where to place your savings and investment dollars.

The same formula will also work to tell you how long it will take for inflation to reduce the value of your investments and savings by half its value today. Just change the above examples to the inflation rate, and you can see how long it would take for eight percent inflation to cut the value of your fixed income in half (nine years).