## Rule of 72

Now I want to play a little game with you. Have you ever heard of “The Rule of 72 “ before? Now its sometimes called the bankers rule… and it’s a very interesting rule tha teaches us how long it takes money to double. So ill just play a little game with you. Let's say I wrote you a check right now for ten thousand dollars.

Okay and now you had ten thousand dollars, alright. Now lets use this example…you are twenty years old and you had ten grand. Now what would most twenty -year-olds do with ten grand if they had ten grand?

Okay in this example, they are going to invest it… they are going to save it and put it somewhere. Now these are just some hypothetical numbers just to give you concept. So lets say you went down and put your money at three percent and you could average three percent, lets use a bank maybe as an example, although banks are paying that today, historically, let's just say the account averaged three percent over time. If you deposited ten thousand dollars and left it there for forty-eight years… what do you think you would have forty-eight years later…if you deposited that money at three percent? Now just so you know that’s not really fair question…because we have never been taught how to figure this out but just guess. Alright here is the answer… forty thousand dollars. You would have forty thousand dollars, is that exciting? Not really, here's how you figure it out. If you divide your interest rate into the number seventy two… what you get is the number of years it takes your money to double. So three divided into seventy two is twenty four…which is about as much math as I’ve memorized these days..so that means every twenty four years the money will double. So you end up doubling it at twenty four years and then again at forty eight years. So you would have forty thousand. Now lets double the interest rate to six percent. Lets say you can average that… if we doubled the rate, what would it seem what happened to the money? So logic says double the interest rate, double the money. Now the rule of seventy-two doesn't work that way… and what we've got now is our money is going to double every twelve years. So now we are going to end up with a hundred sixty thousand… so we have quadrupled the money.

Okay lets double the rate again, lets say you could average twelve percent. Now that’s good average and people are going to say “where are you going to get twelve?” Now you can't get twelve but for example if you save money at a bank right now and they lend money out through credit cards for example, what are they charging on credit cards today? Right so they're using our money to make money we talked about that concept right? So lets just assume for a minute that you were able to average what they average…and you got ten thousand invested twelve percent. Now what do you think you have? Alright ready? Two and a half million okay..is that a little shocking, I was shocked at this one, but this is one that got me. I was wondering well why did I never learn this. Now here's the question we ask… how do you win a game if you don't know the rules? Do banks or insurance companies have any incentive to teach us this rule? This simple concept? Who would benefit from learning this rule?

Now shouldn’t we have learned this rule in school? I mean this should be taught, I don't know why it isn’t but it should be mandatory that we start to learn this.

So can you see that without introducing us to family and friends, that they may never learn this rule? Now that's why (trainee) wanted you to see some of the stuff that he was so excited about.

Now lets apply this in an actual situation.

Okay and now you had ten thousand dollars, alright. Now lets use this example…you are twenty years old and you had ten grand. Now what would most twenty -year-olds do with ten grand if they had ten grand?

Okay in this example, they are going to invest it… they are going to save it and put it somewhere. Now these are just some hypothetical numbers just to give you concept. So lets say you went down and put your money at three percent and you could average three percent, lets use a bank maybe as an example, although banks are paying that today, historically, let's just say the account averaged three percent over time. If you deposited ten thousand dollars and left it there for forty-eight years… what do you think you would have forty-eight years later…if you deposited that money at three percent? Now just so you know that’s not really fair question…because we have never been taught how to figure this out but just guess. Alright here is the answer… forty thousand dollars. You would have forty thousand dollars, is that exciting? Not really, here's how you figure it out. If you divide your interest rate into the number seventy two… what you get is the number of years it takes your money to double. So three divided into seventy two is twenty four…which is about as much math as I’ve memorized these days..so that means every twenty four years the money will double. So you end up doubling it at twenty four years and then again at forty eight years. So you would have forty thousand. Now lets double the interest rate to six percent. Lets say you can average that… if we doubled the rate, what would it seem what happened to the money? So logic says double the interest rate, double the money. Now the rule of seventy-two doesn't work that way… and what we've got now is our money is going to double every twelve years. So now we are going to end up with a hundred sixty thousand… so we have quadrupled the money.

Okay lets double the rate again, lets say you could average twelve percent. Now that’s good average and people are going to say “where are you going to get twelve?” Now you can't get twelve but for example if you save money at a bank right now and they lend money out through credit cards for example, what are they charging on credit cards today? Right so they're using our money to make money we talked about that concept right? So lets just assume for a minute that you were able to average what they average…and you got ten thousand invested twelve percent. Now what do you think you have? Alright ready? Two and a half million okay..is that a little shocking, I was shocked at this one, but this is one that got me. I was wondering well why did I never learn this. Now here's the question we ask… how do you win a game if you don't know the rules? Do banks or insurance companies have any incentive to teach us this rule? This simple concept? Who would benefit from learning this rule?

Now shouldn’t we have learned this rule in school? I mean this should be taught, I don't know why it isn’t but it should be mandatory that we start to learn this.

So can you see that without introducing us to family and friends, that they may never learn this rule? Now that's why (trainee) wanted you to see some of the stuff that he was so excited about.

Now lets apply this in an actual situation.