Thursday, August 4, 2016

Learning the rule of 72 may be a predictor of wealth and happiness

Matt recently shared the "rule of 72." Investing math can be fun because of the large numbers and the multiples of savings consistent investing brings. This post (http://tonyisola.com/2016/08/the-most-powerful-force-in-the-universe/) says that knowledge of compound interest can be a predictor of financial success:

So let's make sure we learn about compound interest, which Matt also told us Einstein called the eighth wonder of the world. 

Actually you already may be a wiz after being exposed to the rule of 72. Here is a question I bet you will answer correctly (and if you don't you'll probably immediately learn it and never forget it), one that supposedly differentiates between those with some genuinely useful knowledge that is a reliable predictor of success:


B is correct:
7 * x = 72
x = ~10 years

Again, the rule of 72 says your investments double every time the product (answer) is 72 when multiplying the years invested by the return on that investment.

Learning that much is simple enough. But the fascinating thing about this post is that simply possessing that knowledge evidently means so much:


And...


And finally...


OK, I'll stop now because the post itself is so much more interesting. He stresses the ways that people win and lose with compound interest, including timely examples like credit card and student aid debt. And he appeals to people of all ages with a positive, no-nonsense message.







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