In this episode, Dr. Matt Motil talks about the 8th Wonder of the World — Compound Interest — Rule of 72.
There are 7 Wonders of the World and Dr. Matt Motil goes into detail the 8th Wonder of the World (Compound Interest) and if you watched last week the 9th Wonder of the World (Real Estate Depreciation).
He uses the same example the whole podcast to make the numbers easy!
Remember if you choose to let your money sit in a bank, it makes less than 1% interest, let that sink in!
Let’s get started…
The Power of Compound Interest
1. 7 Wonders of the Ancient World
Colossus of Rhodes
Pyramid of Giza
Gardens of Babylon
Lighthouse of Alexandria
Mausoleum at Halicarnassus
Statue of Zeus at Olympia
Temple of Artemis
2. 7 Wonders of the Modern World
Great Wall of China
Christ the Redeemer Statue (Rio)
Machu Picchu – Incan City (Peru)
Chicen Itza – Mayan Ruins (Yucatan Peninsula Mexico)
Roman Colosseum – Rome
Taj Majal – India
Petra – Jordan – Indiana Jones & Last Crusade
3. Bonds and Stocks
Bonds make up 4-6% interest and stocks make up 6-7% interest (historical average).
If you invest hard earned cash in bonds and/or stocks you will make up to 4-6% interest and/or 6-7% interest over the life span of the asset.
Real estate is the best place to place money!
4. The Power of Compounding
The Power of Compounding means if you took money and put it in an account and let it ride, it will grow in a vertical curve (slow then fast).
To use the Power of Compounding, you must have time on your side.
Example of Kid at 5 & 6:
If you took a kid at 5 or 6 years old and deposited $2,500 in an account for them at 10% interest both at age 5 and 6. So $5,000 will be deposited in the bank account, and you never gave them anymore money or touched it…
At age 18: they would have $18,000 in the bank account
At age 30: they would have $56,000 in the bank account
At age 60: they would have $992,560 in the bank account
^Without touching anything, the money has compounded and grown itself!
Using the same example…
If you deposited $2,500 every year in the bank account until age 18 and then stopped at age 18 it would multiple 4 times faster:
At age 18: they would have $76,000 in the bank account
At age 30: they would have $241,000 in the bank account
At age 60: they would have $4,213,000 in the bank account
^All without touching the bank account after age 18!
5. The Rule of 72
The rule of 72 means taking 72 divided by the interest rate. The number you come up with is the amount of time it takes your invested dollars to grow. You can get rich without doing anything, but remember it takes time!
Using the same example…
72/10 (interest rate) = 7.2 years, so if you stopped depositing at 6 years old, it would take 7.2 years for your money to double.
At age 6: $5,700 in the bank account
At age 13: $11,253 in the bank account
At age 21: $24,000 in the bank account
As I mentioned before, if your money stays in a bank account, you make less than 1, to put that into perspective…
Huge difference in just 1%…
At 1% interest (72/1) = it will take 72 years for your money to double
At 3% interest (72/3) = it will take 24 years for your money to double
At 7% interest (72/7) = it will take 10.3 years for your money to double
At 10% interest (72/10) = it will take 7.2 years for your money to double
At 12% interest (72/12) = it will take 6 years for your money to double
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