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Double Your Money Einstein!

Written by: Jordan Crouter

Article Overview: Do you want to DOUBLE, TRIPLE or QUADRUPLE your money in a certain period of time? There is a simple formula to show you exactly how to accomplish this. Einstein called this formula the Eighth Wonder of the World. No wonder!

Double Your Money Einstein!

Is it possible to know how long an investment will take before it DOUBLES your money? If your investment is set at a compounding interest rate the answer is YES.

Most people may have learned this in school but may have forgotten the simple formula to calculate how long it will take to double your investment.

In finance there is a term called the Rule of 72. This is a method to estimate your investment’s doubling time. There is also the Rule of 69 which is actually a more accurate number to use to calculate continuous compounding interest, but 72 is referred to and used most often because it is an easier number to divide since it has small divisors (interest rates), such as 1, 2, 3, 4, 6, 8, 9, and 12. The Rule of 72 is very accurate when used on interest rates of less than 20%.

If you were to invest $10,000 with a compounding interest rate of 8% annually, by using the rule of 72 you would divide 72 by 8 which would show the number of years before the $10,000 would be $20,000 would be 9 years. No wonder EINSTEIN called compounding interest the Eighth Wonder of the World!

If doubling your money is not enough, and you want to know how long it would take to TRIPLE your money, you would use 114 instead of 72. So for example, if you have $10,000 and you want to know how long it would take to triple your investment, and your interest rate is 8%, you would divide 114 by 8 which would show that your $10,000 would be $30,000 in 14.25 years.

If you want to know how long before your money QUADRUPLES you would use the number 144 instead of 72. By using the same numbers as the above examples your money would quadruple in 18 years. So your $10,000 would be $40,000 in 18 years at the compounding interest rate of 8%.

You can also look at this formula a different way. If you know you want to double your money in 6 years you would divide 72 by 6 and you would see that you would need to find a vehicle that would give you 12% compounding interest.

By remembering this simple formula when investing your money, you will know that investing in a CD at your bank that earns 1.50% interest, your $10,000 will be $20,000 in 48 years. Such a deal!

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Article Tags: bank CD, compounding interest, double, double your money, eighth wonder of the world, Einstein, interest rate, investment, quadruple, rule of 69, rule of 72, triple



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