Do you know the Rule of 72? It's an easy way to calculate just how long it's going to take for your money to double.
Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.
As you can see, a one-time contribution of $10,000 doubles six more times at 12 percent than at 3 percent.
| Years | 3% | 6% | 12% |
| 0 | $10,000 | $10,000 | $10,000 |
| 6 | | | $20,000 |
| 12 | | $20,000 | $40,000 |
| 18 | | | $80,000 |
| 24 | $20,000 | $40,000 | $160,000 |
| 30 | | | $320,000 |
| 36 | | $80,000 | $640,000 |
| 42 | | | $1,280,000 |
| 48 | $40,000 | $160,000 | $2,560,000 |
How many doubling periods do you have in your life?
This table serves as a demonstration of how the Rule of 72 concept works from a mathematical standpoint. It is not intended to represent an investment. The chart uses constant rates of return, unlike actual investments which will fluctuate in value. It does not include fees or taxes, which would lower performance. It is unlikely that an investment would grow 10% or greater on a consistent basis.
FAQs
Do you know the Rule of 72? It's an easy way to calculate just how long it's going to take for your money to double. Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.
What is the Rule of 72 in simple terms? ›
The Rule of 72 is a calculation that estimates the number of years it takes to double your money at a specified rate of return. If, for example, your account earns 4 percent, divide 72 by 4 to get the number of years it will take for your money to double. In this case, 18 years.
Is the Rule of 72 still valid? ›
The accuracy of the rule of 72
The rule of 72 gives 72/9 = 8 years, which is close to the exact answer.” However, Stanford adds that the rule of 72 is only an approximation that is accurate in a range of interest rates between 6% and 10%. Outside that range, the error can vary as little as 2.4% to as much as 14%.
Does the Rule of 72 always work? ›
The Rule of 72 helps you determine how long it might take for your money to hypothetically double. It's worth noting, the “rule of 72” definition isn't necessarily perfectly accurate because past market results do not predict future market behavior.
What is the Rule of 72 69? ›
Rules of 72, 69.3, and 69
The Rule of 72 states that by dividing 72 by the annual interest rate, you can estimate the number of years required for an investment to double. The Rule of 69.3 is a more accurate formula for higher interest rates and is calculated by dividing 69.3 by the interest rate.
How to double $2000 dollars in 24 hours? ›
The Best Ways To Double Money In 24 Hours
- Flip Stuff For Profit.
- Start A Retail Arbitrage Business.
- Invest In Real Estate.
- Play Games For Money.
- Invest In Dividend Stocks & ETFs.
- Use Crypto Interest Accounts.
- Start A Side Hustle.
- Invest In Your 401(k)
There are two things the Rule of 72 can tell you reasonably accurately: how many years it will take to double your money and what kind of return you will need to double your money in a fixed period of time.
Is the rule of 78 illegal? ›
In 1992, the legislation made this type of financing illegal for loans in the United States with a duration of greater than 61 months. Certain states have adopted more stringent restrictions for loans less than 61 months in duration, while some states have outlawed the practice completely for any loan duration.
How to double 1000 dollars? ›
One of the easiest ways to double $1,000 is to invest it in a 401(k) and get the employer match. For example, if your employer matches your contributions dollar for dollar, you'll get a $1,000 match on your $1,000 contribution.
What is the rule of 42? ›
One of the key rules within my unique Income Method is the Rule of 42 - holding at least 42 income-generating investments that enable you to have reduced risk from any individual holding.
1) Rule of 72
The 'Rule of 72' gives you an estimate of the number of years it will take to double your money in a particular investment tool. You need to divide the rate of returns by 72 to know the time it would take you to double your investments.
What are the flaws of Rule of 72? ›
Errors and Adjustments
The rule of 72 is only an approximation that is accurate for a range of interest rate (from 6% to 10%). Outside that range the error will vary from 2.4% to 14.0%. It turns out that for every three percentage points away from 8% the value 72 could be adjusted by 1.
What is better than the Rule of 72? ›
Choice of rule
Since daily compounding is close enough to continuous compounding, for most purposes 69, 69.3 or 70 are better than 72 for daily compounding. For lower annual rates than those above, 69.3 would also be more accurate than 72. For higher annual rates, 78 is more accurate.
What is the rule of 144? ›
An extension of Rule of 72, the Rule of 144 estimates how long it takes to quadruple your investment if you can estimate the annual rate of return. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.
What is the rule of 73? ›
Lower or higher rates outside of this range can be better predicted using an adjusted Rule of 71, 73 or 74, depending on how far they fall below or above the range. You generally add one to 72 for every three percentage point increase. So, a 15% rate of return would mean you use the Rule of 73.
Does the Rule of 72 apply to debt? ›
You can also apply the Rule of 72 to debt for a sobering look at the impact of carrying a credit card balance. Assume a credit card balance of $10,000 at an interest rate of 17%. If you don't pay down the balance, the debt will double to $20,000 in approximately 4 years and 3 months.
How long will it take to increase a $2200 investment to $10,000 if the interest rate is 6.5 percent? ›
Final answer:
It will take approximately 15.27 years to increase the $2,200 investment to $10,000 at an annual interest rate of 6.5%.
Why is the Rule of 72 useful if the answer will not be exact? ›
The rule of 72 can help you get a rough estimate of how long it will take you to double your money at a fixed annual interest rate. If you have an average rate of return and a current balance, you can project how long your investments will take to double.
How many years does it take to double your money? ›
Very few investors know how long it takes to double their money. Rule of 72 can be of help. Divide 72 by the expected rate of return and the answer is the number of years required to double your money. For example, if a bond offers 6 percent rate of interest per year, then you will double your money in 12 years.
