The Coolest And Easiest Financial Rule

Here's another snippet of financial information that's always good to keep in the back of your mind. Too many things to keep in the back of your mind? Not really. The importance of repetition cannot be overstated.

I repeat: The importance of repetition cannot be overstated. :)

This one is about "The Rule of 72". Sounds like fun, right? No? OK, here's the very short geek part: 

https://en.wikipedia.org/wiki/Rule_of_72

this rule was first put forth (allegedly) by https://en.wikipedia.org/wiki/Luca_Pacioli about 500 - 600 years ago.

The Quick Practical Part:

The whole point here is to help you quickly decide if an investment is a reasonable idea for you by knowing how long it will take your money to double in that place.

Good Example: I could invest in [some thing] which will pay 6% interest. Applying the Rule of 72, I just divide 72 by 6 (the interest rate). The result is 12, of course. That's important, because it tells me that it will take 12 years for my money in that investment to double in value.

With that in mind, I can quickly decide if I'm okay with that or not.

Bad Example: I could just keep it all in my bank savings account. Sure, the bank's only paying 0.5%, but it's all guaranteed by the government. And, when I apply The Rule of 72, I take 72 and divide it by 0.5, which means that my money will double in, oh, about 144 years. I'm okay with that...uh...not.

It is true that this formula is not 100% precise for a lot of good math reasons, but fortunately that's not the point. It's close enough and easy enough to help you make the SNAP decisions you sometimes have to make!