The miracle of compound interest

The next 15 months will be among the most interesting and challenging in the history of our country. During the election campaigns, we will be debating Social Security, Medicare, Medicaid, health care and interest on the debt at every level of politics. Arguments will rage on about higher taxes, lower benefits, inflation and increased volatility in our financial markets.

This will create the most aware and least informed American electorate in history. How’s that? Everyone is “aware” of the challenges we face. But uncertainty and misinformation lies in the plethora of solutions. With so many ideas not working, how do we choose what will work? This is your opportunity. You are the only people with the tools to help Americans take control of their financial futures.

Confusion means opportunity
Americans are confused. They don’t know what to believe. We must simplify our explanations of financial products, because understanding inspires action. And Americans must take action on these financial “miracles” or they will never achieve financial independence.

Let’s talk about what I call the “miracle of compound interest.” I use the accounting rules of 72 and 115 as a simple way to explain this spectacular benefit.

The rule of 72 computes how long it will take money to double by dividing the interest rate into 72. So if your prospect or client earns 4 percent interest, it will take 18 years for their lump-sum investment to double (72/4 = 18). Using 6 percent, it would take 12 years (72/6 = 12).