Page 83 - Workbook2E

TEACH YOUR CHILDREN THE NATURAL VALUE OF MONEY
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Note some ways you can allow your child to make personal spending decisions.
The following graphs can help you teach the power of compound interest. Use them to show your children how money grows when you put it in worthwhile investments. You can also see an explanation of the “Rule of 72” used for calculating how long it takes to double your money.
The Power of Compound Interest
This graph shows how a small savings of $10 per month increases with time at various interest rates.
Saving $10 each month
Interest Rate:
5%
7%
10%
Years: 10
30
$1,553
$4,110
$8,323
$15,260
$26,686
$1,730
$5,209
$12,200
$25,248
$54,480
$2,048 $7,594 $22,605 $63,240 $273,244
$2,300
$9,893 $34,950 $117,648 $390,583
12%
20
40
50
This graph shows how a one-time investment of $1,000 will grow over time at various interest rates.
One-time $1,000 investment
Interest Rate:
20
5%
$1,755
$2,984
$4,986
$8,248
$13,560
$2,105
$4,280
$7,612
$14,974
$29,457
$2,753
$7,300 $17,450 $45,260 $227,390
$3,281 $10,366 $29,960 $93,050
$389,002
7%
10%
12%
Years: 10
30
40
50
Double your Money with—the Rule of 72!
The Rule of 72 shows how long it will take your investment to double, depending on the length of time and the interest rate. You can calculate the time needed to double the value of an investment by dividing 72 by the annual interest rate. For example, an annual interest rate of 8%, will double an investment every nine years.
For a specific time frame to double your money in, you divide 72 by the number of years to get the interest rate needed to meet your goal. For example, to double your savings in 12 years, divide 72 by 12 and discover you need an interest rate of 6% to meet your goal.
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