Build your financial future with this simple money secret

Build your financial future with this simple money secret!

Have you ever wondered how long it’ll take to double the value of an investment or the value of your home? Have you ever pondered how long it would take to double $100 in a standard savings account at a rate of 2.0% interest per annum? Well, a simple rule called the rule of 72 is an easy way to get a grasp on the answers. Here’s how it works:-

Say your house is worth $500,00 today and you reckon it’ll increase in value at a rate of about 8% per year. If you divide 72 by the 8 you’ll get an answer of 9 years. Not bad!

Coming back to the $100 sitting in a standard savings account with an interest rate of 2% per annum, it’ll take 36 years (72 divided by 2) to turn that $100 into $200. That’s ridiculous!

This simple rule can be applied to all sorts of things including the cost of living, returns on investments you may have, or even projections for business valuations and so on. It can also validate industry myths like property values doubling every 7 years. If that was the case a new home buyer would be paying more than $1.5 million for a house worth $400,000 today in 14 years.

Keeping in mind that the Rule of 72 is just that, it is a useful tool to predict the length of time it takes for your investments to achieve your financial goals.