• The ‘Rule of 72’ is a simplified way to calculate how long an investment will take to double, given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors can get a rough estimate of how many years it will take for the initial investment to double.

    Let’s look at some examples of how long it would take to double our money in each of the following instances:

    • S&P/TSX Composite Index is -11.02% (YTD rate)
      That’s right does not even beat the inflation rate and is not even positive!
    • Currently GIC’s are offering 1.05% – again not even beating the rate of inflation but let’s look at how long it would take to double our money.
      72/1.05=68.57 years
    • Savings Accounts at the banks – the highest I could find was 1.85% through Bridgewater Bank.
      72/1.85 = 38.92 years
    • TFSA interest rates through the banks – the highest I could find was through People’s Trust at 2.00%
      72/2.00 = 36 years

    Rule of 72

    We also get the privilege of banking and paying monthly fees for the banks to keep our money and lend it out to others anywhere from 2.74 – 6% depending on the product.

    So why not take control of your money and look for better options?

    I did and here’s what I am presently doing with my money.

    • I have invested in DRIP’s (Dividend Reinvestment Plans), which allow me to purchase blue chip stocks without fees and based on yields I will double my money in 9-15 years based on the individual stock.
    • My TFSA is self-directed and also invested in DRiPS so that I can take advantage of higher interest rates and allow my money to grow.
      Currently the avg. interest rate I am getting is 6.5%.
      72/6.5=11.077 years
    • I also have invested our RRSP’s in Syndicate Mortgages for a fixed return of 8% with no fees.
      72/8 = 9 years

    In short, look at the interest you are earning – is it going to get you closer to your goals or are you spinning your wheels and burying your head in the sand hoping for some kind of miracle?

    By taking control of your finances and following the Rule of 72, you can make sure you will have enough during your retirement.