Do you know about the rule of 70? This rule tells you how quickly you can make a sum of money double by investing. What you do is divide 70 by an expected rate of return you can get on your money. The historical rate of return for the U.S. stock market has been right around 10%. So, theoretically, if you invested in the market and got that level of return, your money would double every 7 years. Just think, if you start investing early, that could really pile up over the years. It’s never too early to think about your future.

hello,

“The rule of 70Inflation erodes the buying power of a dollar, so that eventually it will buy only half of what it used to.
Want to know how quickly your money will lose half its buying power? Divide 70 by the expected inflation rate. If it’s 3.5%, your dollar will be worth 50 cents in 20 years (70 divided by 3.5 equals 20). If inflation soars to 10%, your money’s value is halved in seven years.”

Money earns an interest rate of -expected inflation rate. In addition, you could have invested the money else earning a real return, R. My AP economics book instructs us to teach that the real interest rate equals nominal interest rate minus the expected rate of inflation. Rearranging this equation gives: Nominal interest rate = Real - expected inflation. If holding money earns negative expected inflation then Nominal = Real - - expected inflation which is the Fisher Effect. If inflation is increasing, look for nominal rates to increase by the same amount.

The first column was essentially Economics 101. I covered ideas such as opportunity cost and the hedonic treadmill that might sound pretty esoteric but actually have profound effects on our daily lives.
The second column was born from all the “just give me the answer” pleas I get from readers for simple guidelines they could use to manage their money.
Now I’m going to round out the trilogy by teaching you some math tricks you can use to get a handle on your investments, calculate the cost or benefit of a financial move and impress your friends at parties