The rule of 72 and the Kitchener Waterloo housing market

the rule of 72Are you trying to save money for a down payment? Do you know about the rule of 72?

The rule of 72 shows the effect of time and compounding. The rule of 72 says that your money will approximately double at a point of time determined by dividing 72 by the interest rate you earn. The rule of 72 illustrates the amazingly money can compound if you just give it enough time.

Your money will double in 36 years with 2% interest

72 divided by two equals 36

 

72 divided by four equals 18 years.

Your money will double in 18 years if the interest rate is 4%

 

72 divided by 6 equals 12 years

Your money will double in 12 years if the interest rate is 6%

 

72 divided by 8 = 9 years

 

72 divided by 12 = 6 years

 

With interest rates at historical lows, it’s probably better not to put your money in the bank and wait for it to double. Invest instead in real estate. Over the past decade and a half, house prices in Kitchener Waterloo have been growing at more than 6% per year on average. Applying the rule of 72 in reverse this means that house prices have doubled in about 12 years. (In many Kitchener Waterloo neighbourhoods house prices have actually doubled in about ten years)

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