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Einstein: Doubling is the trick!

The key to the rule of 72 is that it is describing how long it takes your money to double. The shorter the period, the more doubling periods you will get over a long period of time (if you double click on the graph beside you will see what I mean).

How long to Double Your Savings based on Interest Rates

If you look at the table below you can see what happens if you can actually get your investments to give you 7% or higher growth every year:

RateYears to DoubleGrowth over 40 years
1%69.70.0
2%35.02.2
3%23.43.3
4%17.74.8
5%14.27.0
6%11.910.3
7%10.215.0
8%9.021.7
9%8.031.4
10%7.345.3
11%6.665.0
12%6.193.1
13%5.7132.8
14%5.3188.9
15%5.0267.9
16%4.7378.7
17%4.4533.9
18%4.2750.4
19%4.01051.7
20%3.81469.8

So as you see if you can get your investments to pay 10% a year somehow, your initial investment will have grown by 45.3 as a multiple. That means if you invested $1000 (and never added to the principle), forty years later you would have $45,300 , not bad eh?

Einstein Key to Riches ?

Of course if you could find something that paid 20% that same $1000 would be worth $1,469,800 , but who could find something that pays that much (unless you were running a pay day advance company).

No Einstein’s observation about the rule of 72 isn’t that earth shattering, it is simple arithmetic, but something to keep in mind when investing, or going into debt.

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