Rule of 72
"I have no money"
If you grew up in an African family, you are familiar with this line.
I remember one day at home, my brother accidentally found money after my mum said those words. He took it. When asked, he simply replied: "But you said you didn't have money....so which money did I take?"
Growing up, I did not have any sense of saving or investing because "I have no money" shaped the way I related to money. How? Spending until I get to "I have no money."
I did not know we had simple rules that could help save and invest.
Recently I learnt about the rule of 72....it's never too late. It's a simple mathematical hack that shows how long it takes to double your investment.
For example, if you have a milk shop that returns 7% yearly, the 72 rule says you can calculate the return to know how many years it will take to double your investment: 72 (rule) ÷ 7% return ≈ 10 years. That means at 7% return, it will take about 10 years to double the investment. If the return is 10%, then 72 ÷ 10 ≈ 7, so it would take around 7 years.
It doesn't matter how much you put as the initial investment, for example:
→ If you invest Ksh. 1,000 at 7% annual return → it becomes about Ksh. 1,967 (almost 2,000) in ~10 years.
→ If you invest Ksh. 10,000 at the same 10% annual return → it also becomes about Ksh. 19,487 (almost 20,000) in ~7 years.
This rule helps determine which business to invest in.
(P.S. My brother got away with it that day...and I guess my mum found new hiding spots whenever she said "I have no money")