The Rule of 72: How to Double Your Money Without Working
The Rule of 72: How to Double Your Money Without Working
If you put $10,000 under your mattress today, in 20 years, it will still be $10,000 (and worth much less due to inflation).
If you put that same $10,000 into the S&P 500 (avg 10% return), in 20 years, it could be $67,000—without you adding another penny.
This is Compound Interest. It is money making money on the money it already made.
Table of Contents
1. What is the Rule of 72?
This is a mental math shortcut investors use to estimate how long it takes to double an investment.
Formula: 72 ÷ Interest Rate = Years to Double
- ●At 6% return: 72 ÷ 6 = 12 Years to double.
- ●At 8% return: 72 ÷ 8 = 9 Years to double.
- ●At 10% return: 72 ÷ 10 = 7.2 Years to double.
💡 Insight: A mere 2% difference in returns (8% vs 10%) saves you almost 2 years of waiting!
2. The Cost of Waiting
Time is more powerful than money.
- ●Person A starts investing $500/month at age 25.
- ●Person B starts investing $500/month at age 35.
By age 65, Person A will have nearly double the wealth of Person B, even though they only invested for 10 extra years. The early dollars had more time to compound.
📈 Interactive Tool: Compound Interest Calculator
See your future wealth. Enter your monthly contribution and expected return below.
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Don't forget the tax man
Investment gains are taxable. Use our tax calculator to estimate your real net profit.
Summary
You don't need to be rich to become wealthy. You just need to be consistent.
- ●Start early (even with small amounts).
- ●Let the interest compound.
- ●Don't interrupt the process.
Use the calculator above to find your "Magic Number"—how much you need to save monthly to hit $1 Million by retirement.