I LOVE compound interest, it’s when your growth grows! As your investments grow, that growth then grows, and compounds on itself. I like to take a long term view on investments and talk about how long it takes to double your money with an investment. Want to know how long it will take to double your money? Insert, rule of 72.
The rule of 72 is a quick shortcut to let you know how long it will take to double your money. You take 72, divide by your rate of return, and it let’s you know how long it will take you to double your money. If you average 10%, you’ll double your money in 7.2 years. If you earn 7.2%, it will take you 10 years to double your money. If you earn 3%, it will take you 24 years to double that money!
This is why its so important to start saving as soon as you can. Even if its not much money, the more time it has to grow, the more chances it has to double! What’s the most important double? It’s the last one! It could be the difference from going to $200k to $400k, $500k to $1 million, or $5 million to $10 million.