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When I first became pregnant with my first child, I knew that I had a responsibility to fulfill. In order to give him a good life and set up some funds for college, I opened up a bank account with $600 and want it to build up to $10,000 in eighteen years.
Following the Rule of 72, lets calculate:
Rate * Time= 72
Replace the time with 18 years.
Rate * 18= 72
Solving for the rate: R= (72/18 years)= 4%
In order to get an annually deposit of $600 to $10,000 in the time frame of eighteen years, I know that I must pay an interest of 4% on the account on an annual basis.
I have been seeing the difference in this investment and now I do this for both of my children.
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