The Rule of 72: How to Double Your Money
A simple mental math trick to estimate how long it takes for an investment to double in value.
Investing can be complicated, but estimating your returns shouldn't be. The Rule of 72 is a classic shortcut used by investors to quickly calculate how long it will take to double their money at a fixed annual rate of return.
How It Works
The formula is incredibly simple:
$$ Years \ to \ Double = \frac{72}{Interest \ Rate} $$
Example 1: High Return
If you invest in a stock market index fund with an average return of 8%:
$$ \frac{72}{8} = 9 \ years $$
It will take approximately 9 years for your money to double.
Example 2: Low Return
If you keep your money in a savings account with a 2% interest rate:
$$ \frac{72}{2} = 36 \ years $$
It will take 36 years to double. This highlights the power of seeking higher returns!
Why It Matters
The Rule of 72 helps you understand the impact of compound interest without needing a complex calculator. It clearly shows that even small differences in interest rates can make a huge difference in time.
Limitations
- It's an estimation, not an exact calculation.
- It assumes a fixed annual rate of return, which rarely happens in the real market.
- It works best for interest rates between 6% and 10%.
Get Exact Numbers: For a precise calculation, use our Rule of 72 Calculator or check the details with our Compound Interest Calculator.