| There was once an Overseas Filipino Worker (OFW) | | | | which is computed as follows: 72 divided 4 % per |
| who worked abroad for several years. At the age of | | | | annum = 18 years. This means that if you add 18 |
| 29 his savings already amounted to P 100,000.00 | | | | years from the time he deposited his money, the P |
| (Philippine peso) | | | | 100,000.00 will double to P 200,000.00 when he |
| Since the only investment vehicle he knew about | | | | reaches the age of 47. After 18 more years when |
| was putting his money at the bank he went to the | | | | he reaches the age of 65, his money will already |
| bank and deposited his P 100,000.00. The bank | | | | become P 400,000.00. |
| manager gladly accepted the money and even | | | | Now that the P 100,000.00 is in the bank’s hand, |
| recommended that he put it at a time deposit | | | | what do they do with it ? Well they basically invest it |
| account so that it would yield a higher interest rate | | | | in other vehicles of investments which gives them a |
| at 4 % per annum. | | | | higher interest rate such as mutual funds, the stock |
| As suggested by the bank manager, he placed his | | | | market, the money market, government bonds, |
| money in the time deposit account and didn’t | | | | corporate bonds etc. They even use it to loan it |
| touch it until he reached the age of 65. Since he is | | | | back to the depositors at a much more higher |
| retiring from his job, he went back to the bank to | | | | interest rate. But let’s just say that all of the |
| withdraw the P 100,000.00 in his time deposit | | | | bank’s investing activities gave a return of 12 % |
| account. To his amazement his P100,000.00 had | | | | per annum. Using the rule of 72, it can be determined |
| already become P 400,000.00. Because he wanted to | | | | that the same amount of money will double every 6 |
| enjoy his life, he withdrew all his money and lived | | | | years. (computed as follows: 72 divided by 12 % |
| happily ever after. | | | | interest = 6 years) |
| Do you think this is a “live happily ever | | | | After 36 years of waiting, the OFW claimed his P |
| after”? Has this OFW “wisely” handled | | | | 100,000.00. You wouldn’t be surprised why the |
| his money? Are you sure he is maximizing the full | | | | bank manager willingly and gladly gave him back the P |
| potential of his money or has somebody become | | | | 100,000.00 plus the interest of P 300,000 amounting |
| more richer because of his ignorance ? | | | | to a total of P 400,000.00. No sweat, they already |
| To fully understand this, take note of the Rule of 72. | | | | made more or less a total of P 6,400,000.00 from |
| In order to know how many years it takes for your | | | | the OFW’s P 100,000.00 deposit. Now you tell |
| money to double you only need to follow this rule | | | | me if that isn’t hi-way robbery ! |
| which is simply stated as follows: 72 / interest = No. | | | | If you want to be wealthy and be a better steward |
| of years it takes for your money to double | | | | of your money then think like the bank! Make the |
| For this certain OFW, his money will double every 18 | | | | Rule of 72 work for you ! |
| years. This is simply solved by applying the rule of 72 | | | | Desiring to know more about investment strategies ? |