Easy rule for quick calculations.
If you are not a mathematics expert (like me), the Rule of 70 is a very important and useful tool that can quickly calculate various financial transactions. It’s most commonly used to calculate how long it would take to double your investment money. I’ve included a calculator here and will also add it to the calculator page that you can access via the top menu of the blog.
The Rule of 70 formula is : 70 divided by the growth rate of the variable.
The mathematical formula is n= 70 over R
For example : 70 divided by 10 (10% return rate)=7 years. So if you divided 70 by a return rate of 10%, you would double your money in around 7 years.
Therefore an investment of $10,000 would take around 7 years to double if you were able to receive a 10% rate of return. 7 to 10% is not an unusual return expectation for most managed funds or unit trusts. If you’ve read my post Buffet makes friend millions you’ll see I included a savings chart for Aust.Foundation Investment Company over a 14 year period. It’s amazing how quickly an amount of savings can grow if you are disciplined enough to keep adding regularly to the savings pool!
You can also use Rule of 70 to calculate ecomonic growth. For example, if an economy grew at 2% per year, it would take 70 divided by 2% = 35 years for the economy to double in size.
Don’t ask my why but the plugin company that supplies this calculator has decided to only include a Rule of 72 calculator which comes up with roughly the same answers. I would have preferred a Rule of 70 but it wasn’t available.
You could also use the Savings Calculator on the Calculator page to calculate a regular monthly savings amount.
Hopefully this has helped you quickly work out how long it will take for a sum of savings to double.