Hola bellas! Let’s say you’re financially on track, you have no debt, have money saved, and have decided to start investing. Investing is still new to you but you’re wondering how long it will take your investment to double? Well, you’re in luck because there’s an easy formula that you can use to figure out how long it will take your investment will double. It is called the Rule of 72. The rule of 72 is a simplified formula to estimate the number of years it will take to double your investments.
The formula for the rule of 72 is:
Years to double= 72 ÷ interest rate
The interest rate is the rate of return on an investment.
For example, you invest $1,000 and your rate of return is 8%. This means that you will double your $1,000 investment in approximately 9 years (72 ÷ 8).
It is important to point out that the rule of 72 can only be used with compounded interest only. Compound interest is the interest that is calculated on the initial investment (ex: $1,000), in addition to accumulated interest over time. For example, in a year, if you invest $1,000 and your interest rate earned on your investment is 8%, this translates to $80. In the second year you invest, you will now be investing $1,080 and so forth. Meaning that your interest is calculated on the initial investment, along with accumulated interest over time.
I hope this formula is useful to you and motivates you to start investing! According to research findings from the FINRA Foundation, about 32% of the national population has investments in non-retirement accounts. Also, according to the FINRA Foundation, the number of women who have non-retirement investments is even lower at 25% and among those that are aged 18 to 34, the percentage is 27%!
If we look at the percentage of minorities investing, the percentages are even lower. We need to change that! We need to make some extra cash for our future so that we can be financially independent and live the lives of our dreams! Without debt, with emergency funds, with lots of savings, with enough money to give to others, and with the liberty to take all the Instagram worthy vacations we dream of. What are you waiting for? Start now!!!
[expand title=”Sources”] https://www.usfinancialcapability.org/downloads/NFCS_2018_Inv_Survey_Full_Report.pdf