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Rule of 72

Submitted by Southwest Investment Advisors on November 18th, 2014

How long does it take to double your money? It depends on the growth rate. The Rule of 72 is a simple math formula to determine the number of years it would take for a sum of money to double. Simply divide an assumed rate of growth (let’s say 7%) into 72. The answer: 10 years. If the rate of growth was 10% the answer would be 7 years.

 

The example below shows a current balance of $3,125 doubling every ten years. The most important aspect of this chart to notice is that fully half of the ending balance of $100,000 was created in the last ten years of the 50-year time period shown. You can see how critical it is start saving early.

For illustrative purposes only

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