The Rule Of 72
This is a handy ‘rule’ that I learned a long time ago and often comes in handy. The rule of 72 refers to a simplified way to estimate the amount of time that money invested at a given interest rate will take to double in value. Simply divide 72 by the interest rate in question and that will give you a rough number of years that it will take for your initial investment to double.
An example;
If you invest $10,000 in a savings account at 3%, it will take about 24 years for initial $10k to double to $20k. (72 / 3 = 24). At 12%, it would take approximately 6 years (72/12 = 6)
This is intended to be a simple way to ballpark the amount of time using simple math. 72 is evenly divisible by a lot of numbers, so it makes for easy math. if you have a calculator handy, it is more accurate to use 69.3 instead of 72. Here is a breakdown of the different values:
| Rate | Actual | rule of 69.3 | Rule of 72 |
|---|---|---|---|
| 0.5% | 138.7 | 138.6 | 144 |
| 1% | 69.32 | 69.3 | 72 |
| 3% | 23.105 | 23.1 | 24 |
| 4% | 17.34 | 17.325 | 18 |
| 6% | 11.553 | 11.55 | 12 |
| 9% | 7.705 | 7.7 | 8 |
| 12% | 5.78 | 5.775 | 6 |
