The Rule of 72

by Edward Galstyan

So you’re saving money — care to learn an easy finance trick?

The rule of 72 is an easy way to determine how long an investment might take to double with a given, fixed annual rate of return. To figure out a rough estimate of how many years it will take an investment to double, use the following formula:

Number of years investment will take to double = 72/Given Interest Rate

Let’s try some simple numbers out.

Rule of 72 Interest Rate Number of Years to Double

72                                      1%                                           72 years

72                                      2%                                           36 years

72                                      3%                                           24 years

72                                      4%                                           18 years

72                                      5%                                           14.4 years

72                                      6%                                           12 years

Example: at 6% it will take 12 years for $1 to double to $2 or $100 to double to $200.

You can also move the formula around to figure out what interest rate you must invest in to double your money.

Formula: 72/Number of years = interest rate you need to double your money

Example: You want your money invested to double in 10 years

72/10 = 7.2% Interest Rate to double your investment.

The Bottom Line:

If you want a quick, easy, rough estimate — you may use the Rule of 72

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