Rule of 72

The Rule of 72 is a simplified formula that calculates how long it'll take for an investment to double in value, based on its rate of return. The Rule of 72 applies to compounded interest rates and is reasonably accurate for interest rates that fall in the range of 6% and 10%.

This rules states that if you divide the interest rate into 72, the resulting number approximates the number of years it takes for that money to double in value.  So, if your interest rate is 8%, then your money will double ever NINE YEARS.

Let's take $50,000 in 2020 and use 10 years for convenience and say you are 20 years old...

$100,000 in 2030 - 30 years old

$200,000 in 2040 - 40 years old

$400,000 in 2050 - 50 years old

$800,000 in 2060 - 60 years old

$1,600,000 in 2070 - 70 years old

Today, people are retiring at 67 years of age and by the time a 20 year old retires, the retirement age will be 70 years of age.  And, you can see by the above calculations that your money will have substantially grown.

Where do you get $50,000?

Well, for one, you could ask your parents for it instead of paying for college...  Then, you could work and pay for college yourself.  

If that is not an option, then save $2.50/day for 40 years and at the end of each month put that money in a mutual fund.  At the end of 40 years, you will have $500,000.  Now, if you are 20 years old and are just married and both you and your spouse are working then, each of you can save $2.50/day and reach age 60 with $1,000,000.

If this sounds too good to be true, then do research on the Rule of 72 and do research on Mutual Funds.  You will find that Mutual Funds for the last 50-75 years have generated an annual interest rate of 10% when money is left in the account for 20 years.

This simple investing knowledge should be taught in high school, but it is not...