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Rule of 72
JEN: Hey! Turtle!
TURTLE: Hey, ah, no refunds, kid. Them's the breaks.
JEN: Don't worry, I get it. You may be a streetwise con man.
TURTLE: I prefer con turtle.
JEN: But when it comes to compound interest, you do know your stuff.
TURTLE: Go on.
JEN: The more time you give your compounding investments, the more money your money makes for you.
TURTLE: Interest earning interest on interest, as I always say.
JEN: What I want to know now is how my investment will sync up with my savings goal.
TURTLE: Uh huh.
JEN: I need to figure out how long it will take to double my money if my interest rate is 3%.
TURTLE: Woah! Hold your horses, Purple Pants. This is big league stuff.
JEN: Well, can you figure it out?
TURTLE: The only way—and I mean the only way—to figure it out is to use this very complex crazy math. You gotta use your exes and your logs and your bases. There is literally—and I can't stress this enough—literally no other way to calculate this or even estimate it.
JEN: Oh.
TURTLE: I can do it.
JEN: Oh?
TURTLE: But you'll have to shell out. 20 bucks.
JEN: Oh, uh, OK, I guess…
JUNIOR: What about the Rule of 72?
JEN: Wha?
JUNIOR: The Rule of 72!
TURTLE: Junior.
JUNIOR: What's your interest rate again, Purple Pants?
JEN: 3%.
TURTLE: Junior, the first rule of 72 is you don't talk about the Rule of 72!
JUNIOR: Hmmm… 24 years! At 3% interest, it will take 24 years for your investment to double in value.
TURTLE: Aaaargh!
JEN: You did that so fast!
JUNIOR: It's easy with the Rule of 72! All you have to do is divide 72 by the annual rate of return—that's your interest rate. Yours is 3%, so 72 divided by 3 is 24.
JEN: That's amazing! So if my interest rate is 6%?
JUNIOR: 72 divided by 6 is 12. It would take 12 years to double.
JEN: Or 1.5%?
JUNIOR: 72 divided by 1.5 is 48. It would take 48 years to double.
JEN: I like this system better.
JUNIOR: It's not as exact as the compli-mi-cated math, but it's a very close approxi-mer-ation!
JEN: You are as adorable as you are financially knowledgeable. And you saved me 20 bucks!
TURTLE: Aaaargh!
JUNIOR: In times of historically low interest rates, it's even more important to start investing early. I'm still a baby turtle, and even I'm earning compound interest.
JEN: Oooo, so cute.
TURTLE: Would you look at that? Nap time. Show's over! Come on, Junior. See ya.
JEN: Hey!
TURTLE: Let's go over this one more time. When Pops is working, Junior should…
JUNIOR: Pretend to be a banana.
TURTLE: 'Cause?
JUNIOR: Because bananas are quiet and don't give away secrets or ruin careers.
TURTLE: That's right.
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