Canadian Personal Finance Blog

Einstein Finance

This is a repeat, but a good article Einstein Finance , hope you enjoy…

No, it is not E=MC^2, look at the mess that one has gotten us into.

I have read a bunch of places that Einstein was the first to quote the rule of 72. What is the rule of 72? OK, this one is really important for compound interest or growth, so pay particular attention to this one. If you have an investment M it and it is growing at a rate of G (compounded yearly) if you divide G into 72, that is how long it will take M to DOUBLE in value.

Some examples:

• I buy a bond at 4% interest yearly growth (compounded), it will take 18 years for this bond to DOUBLE in value (i.e. 72 / 4 = 18 )
• I buy a bond at 2% interest and it will take 36 years for this to double in value.
• I leave my money in my bank account that pays 1% interest, it will take 72 years for it to double in value!

I don’t think I completely buy that Einstein thought this up, given that I have a math degree and this is just straight math, but let’s just say Einstein did say this, for now.

Find things that grow annually by 10% and your money will double every 7 years, which is really a good thing! Einstein Finance, a new term!

–C8j