By MoneyBees
Work out how many years your money takes to double with the rule of 72, next to the exact answer, with CPF interest rates and the latest T-bill and Savings Bond yields as examples.
A shortcut for how long money takes to double: divide 72 by the yearly return in percent. At 4% a year, 72 / 4 = 18 years. The exact answer is ln 2 / ln 1.04 = 17.67 years.
It is closest for rates between about 6% and 10%. At 2.5% it says 28.8 years against an exact 28.07; at 20% it says 3.6 years against an exact 3.8. For quick sums it is close enough; for planning, use the exact figure.
At the Ordinary Account's 2.5%, about 28 years. At the 4% floor rate on the Special, MediSave and Retirement Accounts, about 17.7 years. CPF has extended the 4% floor to 31 Dec 2027. Extra interest on the first S$60,000 makes small balances double a little faster.
7.2% a year by the rule of 72, or 7.18% exactly with yearly compounding.
Yes. Divide 72 by the inflation rate to see how long prices take to double. At 2% a year, prices double in about 36 years, so your money buys half as much.
Both are shortcuts. 69.3 is the exact figure for continuous compounding, and 70 is easier to divide. 72 divides evenly by many rates and is more accurate for yearly compounding at common rates, which is why it is the one most people use.
Yes, use the return after fees. A 6% return less a 1% yearly fee is 5%, which takes 14.4 years to double by the rule instead of 12.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).