How long does it take an investment to double in value? Meet the Rule of 72. This is a simplified equation used to estimate the number of years an investment may take to double at a given annual rate of return.
The Rule of 72 states that you can get an estimate of how long a sum of money will take to double by dividing 72 by the rate of return:
72 / (annual return) = (years for principal to double)
An example: An investment with a 9% annual return, means your money should double every 8 years.
The Rule of 72*
| YEARS | 9% |
| 0 | $10,000 |
| 8 | $19,926 |
| 16 | $39,703 |
| 24 | $79,111 |
| 32 | $157,633 |
| 40 | $314,094 |
We believe savings accounts should give you that kind of return, not just risking your money in the market, thus why we created the Market Savings program, which combines the safety of an FDIC-insured bank account with the return potential from investing in the market.
The core investment philosophy of Save is to generate stable returns on savings or deposit instruments and other cash accounts using market investments that do not require any customer outlay of capital but, rather, utilize the economic value of that cash or cash transactions as its principal.
That economic value could be due to interest that the customer forgoes or savings in fees that would have otherwise been paid directly or indirectly on customers’ transactions. Those external revenues to the customers’ savings/spending are used to finance the investment and ensure it doesn’t lose value.
Save can achieve such high return potential1 by investing on your behalf in a diversified market portfolio based on your risk preferences. While typical investments in the market can be risky, your Market Savings deposits are FDIC-insured2, meaning 100% of it is protected to the maximum allowed by law.
That’s what makes it so unique — you get the security of a bank account and the earning potential of an investment portfolio. Maximizing your current savings account’s earning potential will help you build wealth faster.
The chart below breaks down the Rule of 72 for other return rates compared to the Market Savings program’s 9% average annual return:1
Rule of 72 Rate Comparison*
| YEARS | 1% | 3% | 9% |
| 0 | $10,000 | $10,000 | $10,000 |
| 8 | $10,829 | $12,668 | $19,926 |
| 16 | $11,726 | $16,047 | $39,703 |
| 24 | $12,697 | $20,328 | $79,111 |
| 32 | $13,749 | $25,751 | $157,633 |
| 40 | $14,889 | $32,620 | $314,094 |
Your choice: 24 years with traditional savings accounts or a little over 8 with the FDIC-insured 5-year Market Savings term.
To get an even more accurate comparison with interest rates that fall outside of 6-10%, the Rule of 72 changes. In these cases, you can utilize this compound interest calculator from the SEC to calculate how much your money can grow.
* This table serves as a demonstration of how the Rule of 72 concept works from a mathematical standpoint. It is not intended to represent an investment. The chart uses constant rates of return, unlike actual investments which will fluctuate in value. It does not include fees or taxes, which would lower performance. It is unlikely that an investment would grow 10% or greater on a consistent basis.
1 Average annual returns reflect the most recent deposit rates and are based on hypothetical back-tested performance in the Save Moderate Portfolio from 2006 to present and are shown net of fees. Hypothetical back-tested performance is no guarantee of future performance and actual results will vary. Returns are subject to change daily. For client accounts, the average annual return percentage calculated across the full term length of investment will never reflect returns of less than 0%. Calculations of average annual returns based on hypothetical back-tested performance across any term length of investment of one (1) year or greater are based on an assumption of sequential reinvestment of the principal and any returns of each such security into a new hypothetical strategy-linked security effective on the maturity date of the predecessor security. All return figures shown are for informational purposes only and are not actual customer returns. For more detailed information please see https://joinsave.com/hb-moderate.
2 To obtain FDIC insurance coverage, customer funds provided will be deposited into non-interest-bearing accounts at Webster Bank. FDIC insurance coverage for funds deposited at Webster Bank is limited to not more than $250,000 per depositor, per FDIC-insured bank, per ownership category. Actual deposit insurance coverage may be lower if you have other funds deposited at Webster Bank, N.A. Customers are responsible for determining the amount deposited in each account at Webster Bank, N.A., and for monitoring the total amount of their deposits at Webster Bank, N.A., to determine the extent of available FDIC insurance coverage in accordance with FDIC rules. Learn more at: https://www.fdic.gov/deposit/deposits. Only the funds customers provide and deposit with Webster Bank, N.A. will be eligible for FDIC insurance. Webster Bank is not providing any investment advice or responsible for the purchase or performance of any investment contracts. The funds held in the Apex Clearing Corporation accounts are not FDIC-insured, are not bank guaranteed, and may lose value with a minimum return of zero. Maximum balance and transfer limits apply. Neither Save Advisers, LLC, nor its affiliates, are a bank. Apex Clearing Corporation is a member of the Securities Investor Protection Corporation (“SIPC”), formed by Congress to protect “customers” of broker-dealers and to promote public confidence in the U.S. securities markets. Customers of a SIPC Member that fails financially are afforded certain benefits under the Securities Investor Protection Act (“SIPA”). These benefits are relevant only if the broker-dealer that “carries” a customer’s account fails and is liquidated under SIPA. At Apex Clearing Corporation, your investments are protected by SIPC up to a maximum of $500,000 total, including $250,000 in cash balances. Coverage limitations apply. To learn more about SIPC coverage, visit the SIPC website at www.sipc.org.
