what is rule 72 ?

Do you know about rule 72 ? I recently came across the term when I was reading a book about investment property. If you're in accounting, the term would be familiar to you.

It's a simple way to count how long your money will double in value given the current interest. It's not a sure answer but gives a very good approximation.

So, if you want to know when that $100 in your bank account is going to be $200, then you will use this formula. It's just simply,

72
number of years needed = --------
interest

And for your $100, with the current interest of around 6%, it will be 12 years before your money double up.

This can also work with inflation, I think currently the inflation is around 3% (I THINK). That means your $100 in 24 years (72/3%) will only be worth $50. This concept is a bit harder to understand because the value of money decreases overtime.

So that's just a short lesson in Rule 72.