Rule of 72

Ok, so I am off on a little tangent here, but I think it will be worth your while. Let us first assume that you are already making money, enough so that you want to put aside some of it and save. Do you know where to put your money? Do you know how compound interest works?
Ever heard of Benjamin Franklin? Yes him, one of our founding fathers. He was a brilliant man in so many ways and one of his contributions was the "Rule of 72." It explains how compound interest works. Basically it will tell you how long it will take for your money to double given a set interest rate. Say, for example, you had $1000 and the interest rate was 3%. Rule of 72 says that it will take 24 years for your money to double. (i.e. 72/3=24) You might find a bank, and it would be hard to do so, that would give you 3% on your money. Usually they give you 1-2%, which if you think about it, is an insult. Especially if consider inflation hovering around 4-5%. At that rate your money is actually losing purchasing power. The banks and insurance companies know of the effects of compound interest, so they are more than willing to give you this 1-2%. Does that mean that they turn around and lend out your money to someone else, by way of credit card, auto loan, mortgage etc., at the same rate? Heck no, they charge, depending on the loan product, up towards 20% plus for credit cards. They make a boat load of money of your "savings" and that is why banks and insurance companies have the biggest and grandest building in any town/city you ever go to. There is no question that the banks take advantage of peoples ignorance on compound interest.

Now what if I were to tell you that there is a way to save or rather invest your money at a higher rate? What would you do? Say instead of 3% you found a place where you could get 12% return on your money. That means it would take that $1000 you had only 6 years to double. (i.e. 72/12=6) Now you can see how your money would grow with that kind of return. The problem is where do you find a place with that kind of return? The answer is in mutual funds. You should take some time to learn about mutual funds and what they can do for you. Truth is that, even with the huge fluctuations on Wall Street, over a 50-60 year average Wall Street has produced an average return on your money at around 12-15%. Mutual funds allows you to be interactive in the market, but with a reduced risk. Mutual funds spread the risk by investing in multiple companies and industries. Take some time researching and learning about mutual funds and with the money you make with your online ventures, hopefully through some of the ones I promote here on this blog, you can invest that money and watch it grow and benefit you and your family for the rest of your lives.

Good luck and I hope you found this little detour helpful!