The Rule of 72

The story of the Tortoise and the Hare relates directly to stewardship.  The steady pace Tortoise wins the race because he patiently and methodically plugged away at his task of getting from point A to point B.  He didn’t have a lot of resources, but what he did have he managed very well.  The Hare on the other hand had lots of resources, but he exploited them.  He wasted them and ran out of resources before he could finish the race so he ended up falling asleep and losing.  The Hare was a prodigal.  The Tortoise was a Steward. 

Proverbs 13:11 says, “Wealth gained hastily will dwindle, but whoever gathers little by little will increase it.

Little by Little the Tortoise did what he needed to do to win!  There's an important financial principle in there!  Saving little by little enables you to win!  If we start saving and investing our gifts, our talents, our time, and our money now, then we'll reap a greater reward. One financial principle that helps us understand this is the Rule of 72.  It's a simple equation that helps you determine how long it will take your money to double if you save it at a specific interest rate.  For example, let's say that you invest some amount of money in a conservative investment that earns 8%.  To determine how long it will take your money to double you can just take the number 72 and divide it by 8.  a quick calculation shows that it will take approximately 9 years for any amount of money to double at an interest rate of 8%.  

This also helps you see how important it is to start saving and investing in your gifts and talents while you are young.  If we start developing them now little by little, imagine how much better at it we will be later.  As an example, I learned to play the guitar in middle school.  I was usually either 1^st or 2^nd chair in my class.  However, after middle school I put my guitar down and never played it.  I didn’t continue my lessons, I never practiced, nor did I even play for fun.  In college I wanted to play guitar, but I hadn't played for 4 years.  It took me quite some time to relearn what I had already learned.  Most other students at that time were much better at it than I was because they had invested more of their time when they were young.  The more time I had devoted to it when I was younger, the better I would be now.  

Same thing goes for saving money.  If you were to save $2,000 a year from the age 20 to 30 you would have invested a total of $20,000.  At a conservative rate of 8%, by the time you turn 65 it will be worth almost $500,000.  But what if you wait until you are 31 to start saving and then you invest $2,000 per year until you retire at the age of 65.  You've put in a total of $70,000 in this example ($50,000 more than our prior example).  Guess how much it's worth at 65?  It's actually worth less than if you had starting investing $20,000 10 years earlier. Those early years make all the difference!  "But whoever gathers little by little will increase it!"  

Saving and investing are principles that we can all learn from.  They are habits that we should form when we are young, so that we don't find ourselves in debt when we are older.  Like the Tortoise, it helps us win!