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Retirement planning is crucial for financial security. One should set aside a portion of income monthly and seek expert advice to ensure a comfortable, stress-free retirement
These rules help individuals understand the value of their money and how to grow it effectively. (AI Generated/News18 Hindi)
Planning for retirement is essential, but calculating how much one needs and managing finances can often seem overwhelming. A report by The Economic Times highlights four simple rules designed to make money calculations easier. These rules help individuals understand the value of their money and how to grow it effectively.
The Concept Of Money’s Time Value
Understanding the time value of money is crucial. This concept includes two key components: compounding and discounting.
Compounding shows how much one’s money will grow over time. For instance, investing in fixed deposits, national saving certificates, stocks, or mutual funds allows interest to accumulate. Investing monthly in SIPs or recurring deposits can accelerate growth.
Discounting, on the other hand, determines the present value of future money, considering inflation, uncertainty, and other investment opportunities. Both concepts are vital for personal finance management.
Rule Of 72
The Rule of 72 helps determine how long it will take for money to double. By dividing 72 by the interest rate, one can estimate the doubling time. For example, with a 15% interest rate, it would take approximately 4.8 years for money to double.
Rule Of 114
The Rule of 114 calculates the time it takes for money to triple. At a 10% interest rate, this would be 114 ÷ 10 = 11.4 years. Similarly, the Rule of 144 estimates when money will quadruple; at a 10% interest rate, this occurs in 14.4 years. These rules are invaluable for investment planning.
Rule Of 70
The Rule of 70 illustrates the impact of inflation, indicating how much weaker one’s money will become in the future. By dividing 70 by the current inflation rate, one can estimate the time it takes for the value of money to halve.
For instance, with an inflation rate of 4%, the value of money would halve in 17.5 years. This calculation is critical for retirement planning, helping manage monthly withdrawals and avoid the adverse effects of inflation on income and expenses.
For example, investing Rs 1 million at the age of 30 with a 10% interest rate can grow to Rs 2 million in 7.2 years and Rs 4 million in 14.4 years. However, inflation must be taken into account.
Retirement planning is essential to avoid financial worries in later years. It is advisable to set aside a portion of money each month according to one’s budget and seek proper financial advice to ensure a happy and stress-free retirement.
October 20, 2025, 13:09 IST
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