Rule 72 for quick financial calculations

Have your heard of Rule 72 in financial calculations?

This is a very quick way for one to calculate the return on investment. For example, if you put $10,000 in your bank, and if the bank pays you an interest rate of 3% per annum, it will take 24 years for your $10,000 to double to $20,000; if the bank were to pay you 1% per annum interest rate, then it will take 72 years for your $10,000 to double. If you can find an investment that could yied 6% per annum, then in 12 years, your initial investment of $10,000 would double.

The same applies to the calculation for inflation. Assuming you have $10,000 savings in the bank, and if the inflation rate is 3% per annum, your $10,000 will be worth $5,000 in 24 years' time; and if the inflation is 6% per annum, your initial savings of $10,000 will become $5,000 in 12 years' time. Hope you have learnt a quick way of doing financial computations.

As a matter of practical interest, when the banks here in Singapore are paying 0.5% per annum interest rate, it will take 144 years for any initial amount of investment to double in value. So, do you still want to put your money with the banks?

Such low savings interest rate might be the reason why many people are attracted to any financial instruments that promise higher returns, but most people do not or forget to read the fine prints in the contracts they sign and when problems arise, finger pointing starts. We have heard and witnessed a reasonably large group of senior citizens and retirees who have lost their lifelong savings and retirement nest eggs through ignorance or perhaps greed.