Rule of 72 – Why It’s a good idea to start investing young!

Ever consider investing? Thinking about putting it off for another couple years? DON’T. Here’s why:

Say you’re a 15 year old and you invest $2,000.00 USD in something with a reasonably safe interest rate of 8%. Using the rule of 72 you can determine how many years it will take for your investment to double (I will explain the rule at the end of this post). With an interest rate of 8% it takes an estimated 9 years for your investment’s value to double.

Using the above $2,000.00 and 8% variables, I’ll show you how much it will increase by the time of retirement.

Retirement age used in this post: 69

Age Investment
15 $2,000.00
24 $4,000.00
33 $6,000.00
42 $12,000.00
51 $24,000.00
60 $48,000.00
69 $96,000.00

By simply investing $2,000.00 at age 15 you’ve gained a whopping $94,000.00. Now, if you where to wait another 9 years to start investing, you'll only gain $48,000.00 -- that's an amazing $48,000.00 difference!

How the rule works:

The rule says that to find the number of years required to double your money at a given interest rate, you just divide the interest rate into 72. For example, if you want to know how long it will take to double your money at eight percent interest, divide 8 into 72 and get 9 years.

Thanks for the advice

I've been invested in three major stock companies since I was two years of age. Up until now I've never really thought about how much money i've made. I should probably go check that out.

You'll probably be amazed as to how much it has increased.

Interesting.
I have quite a bit of money invested in mutual funds and stock at the moment, higher risk, but better rewards

Ya I just learnt all about this last semester in my personal finance class. Very interesting stuff.

Intresting investment post.

Cool, time to start thinking about investing.

I think you need to factor in the rate of inflation before looking at any long term low risk investment, in 50 odd years $96,000.00 will buy you alot less than it can now, low risk tends to track behind inflation hence why people start to look at high risk.

ps did you factor in tax on your interest etc...

A company can't have 15% "earnings" for like 50 years, can it? :s