The Rule of 72

Local church, school and cemetery board leaders have been debating establishing or building existing endowment. Some see merit in locking down their endowment investments while others worry they lose control over some of their funds. While every situation is unique, the bottom line is the stronger the endowment fund, the stronger the financial position of the parish in perpetuity.

As these discussions take place it is important to understand the concept of something called the Rule of 72.

The Rule of 72 is the key to understanding how fast parish, school, and cemetery board investments, particularly endowments, can grow. The Rule of 72 shows how long an investment takes to double in value, assuming there are no new deposits or withdraws. Simply divide 72 by the investment return rate. The answer to that equation will tell you approximately how many years until the investment doubles. For example if the return rate is 2% just do this. 72÷2 = 36. The 36 shows it would take approximately 36 years to double the investment. Unfortunately, most money market certificates aren’t paying even 1%. If, on the other hand, a professionally managed fund earning 7.2% would take just ten years to double. 72÷7.2=10.

The Catholic Foundation in the Archdiocese of Dubuque (CFAD) offers opportunities for parishes, schools, and cemetery boards to professionally and responsibly invest funds to allow endowments to grow. To date, CFAD has just over 160 accounts with nearly $100 million invested for archdiocesan parishes, schools and cemetery boards that are working hard to grow their long-range endowments. Thank you to so many who trust CFAD to partner with them to grow their funds responsibly for the future good of the mission of the Church.