1 / 16

The Rule of 72: Key to Financial Success Explored with Examples

Explore the significance of the Rule of 72, a simple formula linked to compounding interest and financial growth. Learn how it can help in investment decisions and managing debt effectively with practical examples like Doug's Certificate of Deposit and Jessica's Credit Card Debt.

causey
Download Presentation

The Rule of 72: Key to Financial Success Explored with Examples

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. The Rule of 72The most important and simple rule to financial success.

  2. Albert Einstein How are Albert Einstein and the Rule of 72 related?

  3. T=P(I+I/N)YN Credited for discovering the mathematical equation for compounding interest

  4. The Rule of 72

  5. Things to know about the Rule of 72

  6. Doug’s Certificate of Deposit • Invested $2,500 • Interest Rate is 6.5% Doug invested $2,500 into a Certificate of Deposit earning a 6.5% interest rate. How long will it take Doug’s investment to double?

  7. Another Example The average stock market return since 1926 has been 11% Therefore, every 6.5 years an individual’s investment in the stock market has doubled

  8. Can the Rule be applied to debt? • It can show how fast a debt can double • It can show the impact of interest rates on debt YES

  9. Jessica’s Credit Card Debt • $2,200 balance on credit card • 18% interest rate Jessica has a $2,200 balance on her credit card with an 18% interest rate. If Jessica chooses to not make any payments and does not receive late charges, how long will it take for her balance to double?

  10. Another Example • $6,000 balance on credit card • 22% interest rate

  11. Jacob’s Car • $5,000 to invest • Wants investment to double in 4 years Jacob currently has $5,000 to invest in a car after graduation in 4 years. What interest rate is required for him to double his investment?

  12. Another Example • $3,000 to invest • Wants investment to double in 10 years

  13. Rhonda’s Treasury Note Rhonda is 22 years old and would like to invest $2,500 into a U.S. Treasury Note earning 7.5% interest. How many times will Rhonda’s investment double before she withdraws it at age 70?

  14. Another Example • $500 invested at age 18 • 7% interest • How many times will investment double before age 65?

  15. Any questions?

More Related