Understanding inflation and money using the rule of 72

Financial analyst Paul Roelofse spoke to John Perlman about the rule of 72, the magic number that helps with the understanding of money and inflation.

FILE: If we take an inflation rate to be 6% and divide it into 72, we get twelve. This means that with that rate of inflation the value of money would halve in 12 years. Picture: © Wavebreak Media Ltd/123rf.com

Inflation is being courted by nervous consumers already strapped for cash. But often, we don't understand exactly what the real effect of inflation will be on our finances.

Financial analyst Paul Roelofse spoke to John Perlman about the rule of 72, the magic number that helps with the understanding of money and inflation.

If we take an inflation rate to be 6% and divide it into 72, we get 12. This means that with that rate of inflation the value of money would halve in 12 years.

This not only helps us to predict the real value of our money in the future, but also to understand the dangers of hyperinflation and how it can impact our economies.

To find out more, listen to the full audio below.

This article first appeared on 702 : Understanding inflation and money using the rule of 72