Rule of 72
Approximate years to double an investment.
Formula
Variables
Example
72/6% ≈ 12 years
How it works
The Rule of 72 gives a quick estimate of how long it takes an amount of money to double when it earns compound interest. It works because compound growth is exponential, and for interest rates in the usual range the doubling time is close to 72 divided by the annual percentage rate. The number 72 is a convenient approximation that makes mental maths easy and is reasonably accurate for moderate rates.
When to use it
Use it when you want a fast estimate of investment growth, savings account doubling time, or how long debt can take to double if interest is left to compound. It is most useful for simple back-of-the-envelope finance calculations, not exact legal or accounting work.
Worked example, step by step
Suppose an investment earns 9% per year. Use the Rule of 72: t ≈ 72 / r Substitute r = 9 t ≈ 72 / 9 t ≈ 8 So the investment will take about 8 years to double.
Common mistakes to avoid
- Using the decimal rate instead of the percent rate, e.g. 0.09 instead of 9
- Treating the result as exact when it is only an approximation
- Applying it to non-compound growth, where the rule does not fit well
Did You Know?
Divide 72 by the interest rate to estimate the years for money to double — a startlingly accurate shortcut.
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