Personal Finance: Returns play a big role in everyone’s decision when it comes to investing. People invest their savings to earn maximum money while keeping it safe. In such a situation, the biggest question that comes in people’s mind is how much time it is going to take for their investment to double.
Fun rule of personal finance
If you have ever faced such questions while investing, then a simple rule of personal finance will make the entire calculation possible in a jiffy. This rule of personal finance is known as Rule 72 or Rule 72 of Personal Finance. With its help, you can easily find out how much time it will take for the investment you have made to double.
These rules for compound interest
In fact, people get simple interest on many types of investments, while in many cases they get the benefit of compound interest. In the case of compound interest, it takes less time for investors to double their money, but its calculation becomes a bit complicated. Rule 72 of personal finance makes this calculation easy.
Effect of inflation on money
Before knowing this rule, it is important to understand how inflation affects your money. Due to inflation, everyone’s purchasing power is directly affected. Due to this, the value of money does not remain stable and keeps decreasing year after year. This is why experts always advise investors to choose those investment options which are giving returns higher than the inflation rate, because only then the value of your money is actually increasing.
This is how the rules work
Now suppose you are investing Rs 10 lakh. You have made an FD in a bank and the bank is offering you compound interest at the rate of 8% on an FD of Rs 10 lakh. According to the Rule of 72, you have to divide 72 by the rate of return. Now the number you get will be the number of years it will take for your investment to double. In this case dividing 72 by 8 gives 9. That means it will take 9 years for your Rs 10 lakh to become Rs 20 lakh in an FD giving 8 percent interest.
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