Are you missing out on compound interest
Discover the power of compound interest and the Rule of 72. Learn how your money can double over time, why low-yield savings accounts hold you back, and how smart investing helps build long-term wealth.
MAPFL BLOG
The Rule of 72: Unlocking the Power of Compound Interest to Grow Your Wealth
Do you really understand the words compound interest? I don’t believe most really mentally grasp the concept of making interest on interest, on interest, on interest in the short run. There’s really not a lot of value to that. But if you ever ran the numbers where if you were to double a penny over and over and over, which would be compound interest, how long it takes to be a millionaire?
It’s not as long as you’d think. Have you ever heard of the rule of 72? Basically, you take your interest rate. Let’s just say 6%. Divide that into 72, which would be 12. And that means that it would take you 12 years to double your money. That’s called the rule of 72. And that is because of compound interest that’s earning 6% on 6% on 6% on 6% on 6%.
So that interest on interest, it’s an amazing thing if you have money sitting in T-bills or a savings account where you’re not seeing a decent return. What are you doing? You could easily be averaging five 6% on the low end and potentially see some 10% years. Why not sprinkle those in there, those ten percenters? By having your money in a savings account or T-bills, you’re avoiding that upward side.
Not to mention forgoing a lot of benefits you could have for free that would end up paying for itself. And what I mean by free. You’re going to pay for it in the sense of fees, but the interest that you’re earning, the interest on interest will more than cover those fees. Your savings account won’t do that. Give us a call if you’d like to hear more and have a better explanation.
Exactly what I’m referring to.
Key Point's for Are you missing out on compound interest
1. People Don’t Fully Understand Compound Interest
Most people have heard of compound interest, but few truly grasp its power.
The idea of earning interest on interest repeatedly seems simple but has massive long-term potential.
2. The Penny Doubling Analogy
Illustrates compound interest with the classic example of doubling a penny daily.
Shows that even small amounts can grow exponentially over time.
3. The Rule of 72
Quick formula to estimate how long it takes to double your money with compound interest.
Formula: 72 ÷ interest rate = years to double money.
At 6% interest, it takes 12 years to double your money.
A simple yet powerful mental model to grasp the effect of compound growth.
4. Low-Yield Accounts Miss Out on Growth
Keeping money in low-interest accounts like T-bills or savings accounts means you miss out on significant growth.
Even modest investments earning 5–6% annually could double multiply times over decades.
5. The Power of Market Exposure
Suggests that with proper investment, you can occasionally enjoy 10%+ returns (“sprinkle in some ten percenters”).
Savings accounts don’t allow for this kind of upside.
6. Fees Are Often Offset by Growth
Investment accounts may charge fees, but the compound returns can outweigh those costs.
“Free” is relative—returns from smart investing can essentially make up for the fees you pay.
7. Call to Action
The speaker offers further help and encourages the audience to reach out for a clearer explanation tailored to their situation.
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Are you missing out on compound interest
Additional Points (for Enrichment)
If the transcript feels short or you want to enrich the blog post, here are some ideas to build it out:
➕ Real-Life Example of Compound Interest
- Start with a scenario: “If you invest $10,000 at 6% annually, here’s what it looks like over 10, 20, and 30 years.”
- Show growth visually or in a table to help readers visualize the concept.
➕ The Danger of Inflation vs. Low Returns
- Emphasize that low-interest accounts may not keep up with inflation, meaning you’re effectively losing purchasing power over time.
➕ Common Misconceptions
- Many think investing is risky, but not investing can also be risky due to opportunity cost and inflation.
➕ Tips for Getting Started
- Offer actionable advice: set up automatic contributions, choose index funds or ETFs, speak with a financial advisor, etc.