How long will it take to double my money?

How long will it take to double my money?

The simplest way to figure this out is by utilizing the Rule of 72. The Rule of 72 is a tool that investors use to determine how long it will take for their investment to double in value.

How does the Rule of 72 work?

Let’s lay it out with an example, if you invest $10,000 at 10 percent compound interest, then the Rule of 72 states that in 7.2 years you will have $20,000. You divide 72 by 10 percent to get the time it takes for your money to double. The Rule of 72 is a rule of thumb that gives approximate results. It is most accurate for hypothetical rates between 5 and 20 percent.

I just figured out how long it will take to double my money with the Rule of 72. Is that all?

While to rule of 72 is a great ally to investors in helping them figure out how long it will take to double their money, one needs to remember inflation.

Compound interest is a good tool for investors, but it does not erase the effects of inflation. The real rate of return is the key to how quickly the value of your investment will grow. If you are receiving 10 percent interest on an investment but inflation is running at 4 percent, then your real rate of return is 6 percent. In such a scenario, it will take your money 12 years to double in value.

To learn more about the Rule of 72, click here. If you would like to learn more about us at Federal National Funding, click here, or call us at 201-342-3300. One of our associates will be happy to speak to you.