The Rule of 70 applies in any growth rate application Lets s

The Rule of 70 applies in any growth rate application. Let’s say you have $1000 in savings and you have three alternatives for investing these funds.

A savings account earning 1% interest per year.

A U.S. Treasury bond mutual fund earning 3% interest per year.

A stock market mutual fund earning 8% interest per year.

How long would it take to double your savings in each of these 3 accounts?

Solution

Rule 70 investment doubling time can be calculated by dividing the title 70 by the given interest rate. Thus

1. savings account earning 1% interest per year

Time taken for money to get double = 70/1 = 70 years

2. U.S. Treasury bond mutual fund earning 3% interest per year

Time taken for money to get double = 70/3 = 23.33 years

3. Stock market mutual fund earning 8% interest per year

Time taken for money to get double = 70/8 = 8.75 years