$128,000 Plasma TV

Investing is the enterprise of trying to make money with your savings.The amount of money you make is normally quantified as an annual percentage yield of the money invested.

To illustrate, imagine you have a magic box that only opens on New Years Day. This New Years Day you put $100 in the box. Next New Years Day you open the box and there is $110; your invested $100 and your $10 gain. This represents a Yield of 10% (ten percent - 10 per hundred).

There is a handy rule of thumb called the “rule of 72″. Simply put, you divide 72 by your yield and the result is an approximation of how long it will take you to double your money. In this example you divide 72 by 10 and you get 7.2.

So if you keep making a 10% yield, your money will double in 7.2 years.Now here is where it gets interesting.

Let’s say you’re 21 years old and you just graduated from college. Your parents give you a graduation gift of $2000. Your dad tells you that you should put it in your “magic box” to save for Retirement. You want to buy a big ass flat screen TV which with tax, cables and the wall mounting brackets comes to exactly $2000.

So how much did the TV cost? Of course it cost $2000 but what would have happened if you’d put it in your “magic box” and then taken it out when you turned 65.

We’re talking about almost 44 years. 7.2 goes into 44 over 6 times.So your money would have doubles 6 times.So $2000 would become $4000 then $8000 then $16000 then $32000 then $64000 then $128000.

$128,000