Wrathematics
Three of Henry VIII’s six wives were named Catherine—Catherine of Aragon, Catherine Howard, and Katherine Parr. Three out of six is one half or 50 %. Does the fact that three of Henry’s six wives were named Catherine (or Katherine) mean that if I were to name my daughter Catherine, there is a 50% chance that she will marry Henry VIII?
Would naming my daughter Catherine also give my daughter a two in six chance of being beheaded because Henry had two of his six wives murdered with an axe?
***
Billy learns that college graduates earn, on average, a million dollars more than high school grads over their lifetimes. A cheerful admissions robot “gives” Billy $120,000 to “help” Billy earn a degree in 18th century Midwestern philosophers with a minor in yeast. Billy notices upon being graduated that the vig on his student loans is equivalent to 115% of his pre-tax income, that he can never buy a home, never save for retirement, never afford a family, never get out from under crushing obligations. Should Billy have gotten better financial advice before amassing overwhelmin student loan debt or just put a fork in his eye?
***
Before you complain about your child’s imperfect understanding of all things arithmetic, would you accept a modest challenge? Would you, gentle reader, be willing to learn something, something with a few numbers? Would you as a loving parent take a few minutes to absorb a fundamental understanding of a principle so important that it could have saved Billy’s financial future if only his parents had learned and shared?
If not, skip the following paragraphs. But don’t blame me if your child ends up living in a cardboard box in the financial equivalent of Palookaville.
Credit cards (Boo! Hiss!) charge 24% interest. If Timmy borrows a dollar today, in three years, he will owe two dollars. If Timmy borrows $10,000 today, in three years he owes $20,000. That’s bad. If Timmy makes the minimum monthly payment on that credit card for 20 years, he will pay back over $50,000. That’s terrible.
Your children need to know the Rule of 72. And you need to know the Rule of 72 so you can teach it to your beloved children. Three times 24 is 72. So at 24% interest, it takes three years for you to owe twice as much money as you borrowed. Alternatively, and more optimistically, if you could earn 24% interest for three years, your money would double in that time, your ten thousand dollars would become twenty thousand.
If your money is earning four percent interest, your money doubles in 18 years. Because four times 18 is 72.
The reason the Rule of 72 works is beyond our present scope. All you have to know is that x times y equals 72 where x is the interest rate and y is the number of years until your borrowed money is cut in half.
If knowledge is power, knowledge of math is extraordinary power.
That’s it for this week. Go teach your kids the Rule of 72, help them understand why untenable student loan debt has more in common with nicotine and opioids than with success. Let me know how it goes.
