Our society is really lacking in its financial literacy.  In other words, we’re failing in our financial education.  And the fact is, our school systems generally do not teach it to our kids, but most times the parents don’t know enough to teach their kids either.  So, this is one area where we all have to become self-educated.  So, let’s get smart!

Today, we’re going to go over a fundamental financial principle that we all need to know.  The concept we’re about to show you may be the key difference in your financial life.

Have you ever wondered how you could double your money without doing anything? Well, I’m about to show you how.  But before this will actually work, you do need some money to start out with.  So for those of you are have trouble finding two nickels to rub together, the IW team will exclusively grant you $10,000 (which will magically disappear after you finish reading this article!).  And for those of you who already have $10,000 of real money…well, we’re not mad…we’ll still let you participate.

Seriously…

It’s called the Rule of 72

The Rule of 72 is the formula that will give you the amount of time it takes for your money to double.  In order for our money to double, it must provide a rate of return or return on investment.  This is also known as an interest rate.  So, here’s the formula:

72 DIVIDED by (Interest Rate) = # Years to Double Your Money

You divide the number 72 by the interest rate you receive on your money.  The answer is the number of years it takes to double your money.  For example, if you are getting an interest rate of 4%, you will divide 72 by 4, which equals 18.  This means it will take 18 years for your money to double if it gets 4% interest.

Are You Ready to Double Your Money??

Now pull out that $10,000 we gave you so we can double it!  I’m going to need you to blow the dust off of your math skills and work with me here.  Remember, divide the number 72 by the interest rate.

Question:

How long will it take your money to double with a 6% interest rate?…72 divided by 6 equals…..

12.  The answer is 12 years!

OK, now that you’ve got it down here’s a few examples of what your $10,000 could do…

A B C

Cha-Ching!!

It’s easy to get an interest rate of about 1%.  The average checking account has a rate of return less than 1%.  So, that’s not too challenging.  It is more challenging, however, to get higher rates of return such as 6, 9, or 12 percent.  And it is possible to get much higher rates of return than 12 percent.  Regardless, now that you know how simple it is to double your money, work on increasing your financial intelligence and education so that you can find the means to do it.