Here's a really powerful idea. And you can actually start your teenagers doing this, because parent -- if a child is earning any income at all, they can put it into a Roth IRA; $2,000 a year if they do it from the age of 14 and they stop at age 18, they are going to have over $1,184,000 at age 65. That's unbelievable.
Now, what if you waited a little bit longer? What if you waited, say, until you were age 19? Well, it's still pretty good. You can put $2,000 a year away, do it for eight years. Stop at the age of 27. Never put another dollar away. You'd have over $1 million at age 65. That's the miracle of compound interest.... At 27, you actually have to fund this account every single year for 39 years. You'll have $883,000, but you've put a lot more money away, you had to do it for 40 years almost.
So there is a couple of messages here that are very important. First of all, start young, obviously... [and] Start today. You know, it's not timing the market; it's getting in the market that matters. - David Bach
The rule of 72, put simply, merely provides an approximation of the time needed in an investment at a given rate of return in order for it to double in value thanks to the Magic of compound interest. For example, the rule of 72 states that $1 invested at a 10% interest rate would take approximately 7.2 years ((72/10) = 7.2) to turn into $2.
Ok, so it's not really magic, in fact it's not even super accurate (especially with large investments), but is a great tool for approximation. In my opinion compound interest and the Rule Of 72 should be taught in every school. Everyone should understand this basic formula for financial success before they start working, investing, and spending their money.
