Rule of 72

Albert Einstein famously called compound interest the "eighth wonder of the world," and he is often mistakenly credited with inventing the Rule of 72. In reality, the rule dates back much further-it was first referenced in the late 1400s in a mathematics book by Luca Pacioli, and likely originated even earfier.

The Rule of 72 is an extremely useful and Important concept for students to understand. It provides a quick and simple way for investors, savers, and borrowers to estimate how long it will take for money to double at a given rate of compound interest. This makes it a powerful tool for evaluating financial goals and understanding the impact of compounding.

To fully grasp the Rule of 72, students should also understand the difference between simple and compound interest. While the rule is most often used to estimate how long it takes for an investment to double, it can also help ilustrate how higher interest rates on debt such as student loans or credit cards-can dramatically increase the total cost of borrowing.

Teachers can use the Rule of 72 to reinforce key economic concepts such as the time value of mney, emphasizing why it pays to start saving and investing early. It's important to note that the Rule of 72 is an approximation, not an exact calculation but it remains a quick and reliable way to estimate either the time needed for an investment to double or the interest rate required to achieve that goal.

Useful links

Investopedia: https://www.investonedia.com/terms/r/ruleg72.asp

The Rule of 72: Definition, Usefulness, and How to Use i

This site provides a simple video and helpful graphic to explain the concept. hittps://www.kalsee.com/articles/comoound-interest-rule-gf-72

Video - JUMOKE MI: BANKER EXPLAINS: Double Your Money - The Rule of 72 hilps://youtu.be/2671hs9dYgM?si=e99zDcEi@jROW1cm

University of Texas El Paso (UTEP)-webpage to calculate the Power of Compounding interest

https://www.ciep.edu/student-affpirs/tinancialaid/_õles/kdocs/nule-of-72.pdl