MyMoney Online

The magical rule of 72.

The number 72 has an uncanny ability to calculate the future value of money. So put away your financial calculator and let’s do some mental arithmetic.

Future value of your investment

If you want to know how quickly or slowly for that matter your money will double in value then simply divide the expected rate of return into 72. The result is the number of years it will take.

For example: You invest R10 000 at an expected rate of return of 12%.

72/12=6

It will take 6 years for your money to double to R20 000. If your return is only 6% then 72/6=12

It then take 12 years for your money to double.

When checking this on the financial calculator the value of the investment after 6 years is R19 738 and after 12 years is R20 121.

Future value of money

The rule of 72 can also be used to establish the impact that inflation has on your money in the future. If you divide the inflation rate into 72 then the result is the number of years it will take for your money to halve in value.

For example You have R10 000 saved under the mattress earning no interest and the inflation rate is 6%. 72/6=12

In 12 years your money will be worth R5 000. If the inflation rate is 12% then 72/12=6

In 6 years your money will be worth half.

Checking this on the financial calculator the value at 6% is R4759 and at 12% is R4 644.

Listen to Paul Roelofse's explanation of this to Africa Melane below...

Read more from Paul Roelofse at www.investforlife.co.za


Recommended

by NEWSROOM AI
Read More
Best share on the JSE to buy, right now, and 2 from abroad (by Luthuli Capital)

Best share on the JSE to buy, right now, and 2 from abroad (by Luthuli Capital)

The Money Show’s Bruce Whitfield interviews Luthuli Capital’s Mduduzi Luthuli.

Does your Tax Free Savings Account suck? You’re not stuck! How to transfer…

Does your Tax Free Savings Account suck? You’re not stuck! How to transfer…

How to – quickly and easily – transfer in or out of an existing Tax Free Savings Account, for whatever reason.

Got a bad spending habit? Enter Money Rehab (don’t say ‘no, no, no!’)

Got a bad spending habit? Enter Money Rehab (don’t say ‘no, no, no!’)

Want to live a less stressed, financially secure life? Old Mutual’s John Manyike has tips to help you kick your spending habit.

Tips and tricks to save on insurance (and general info about it)

Tips and tricks to save on insurance (and general info about it)

The Money Show’s Bruce Whitfield interviews Old Mutual Head of Financial Education John Manyike.

3 best shares to buy before the end of March (by Nitrogen Fund Managers)

3 best shares to buy before the end of March (by Nitrogen Fund Managers)

It’s stock pick time on The Money Show! Bruce Whitfield interviews Rowan Williams, Director at Nitrogen Fund Managers.

3 best buys on the JSE, right now (by Cartesian Capital)

3 best buys on the JSE, right now (by Cartesian Capital)

It’s stock pick time on The Money Show! Bruce Whitfield interviews Cartesian Capital CEO Anthea Gardner.

Popular articles
Madiba’s private secretary Zelda la Grange opens up about money (hers and his)

Madiba’s private secretary Zelda la Grange opens up about money (hers and his)

Bruce Whitfield interviews La Grange about her and Madiba's attitude to money (hopes and fears, successes and failures, etc.)

WATCH: The EFF has scored an own goal says Eusebius

WATCH: The EFF has scored an own goal says Eusebius

Eusebius McKaiser questions the party's use of vandalism during weekend demonstrations at H&M.

I was not introduced to Ajay Gupta - Grootes

I was not introduced to Ajay Gupta - Grootes

Stephen Grootes says he believes former Eskom CEO Brian Dames when said he was not formally introduced to the Gupta family.

Vavi: I can't sleep at night for making Zuma the president

Vavi: I can't sleep at night for making Zuma the president

Zwelinzima Vavi says South Africa is paying dearly for choices they've made in being angry with Mbeki and not thinking logically.

Why the PAC wants South Africa renamed Azania

Why the PAC wants South Africa renamed Azania

Pan Africanist Congress's Narius Moloto explains why it supports the name Azania, a word which he says has Arabic origins.

WATCH: Zuma denies crisis at Sassa, won't evaluate isiphithiphithi (chaos)

WATCH: Zuma denies crisis at Sassa, won't evaluate isiphithiphithi (chaos)

Zuma says he cannot be expected to act against Minister Bathabile Dlamini on social grants matter now before the ConCourt.

Who is Advocate Tembeka Ngcukaitobi?

Who is Advocate Tembeka Ngcukaitobi?

The EFF lawyer stole the show during the state capture report court battle.

3 easy questions could bag you R2000!

3 easy questions could bag you R2000!

WIN R2000! But only if you can prove you're a whiz of the MTN Biz Quiz by answering the following three questions...