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.
Does the rule of 72 really work? ›
The Rule of 72 is reasonably accurate for low rates of return. The chart below compares the numbers given by the Rule of 72 and the actual number of years it takes an investment to double. Notice that although it gives an estimate, the Rule of 72 is less precise as rates of return increase.
What is the rule of 72 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 long will it take $1000 to double at 6 interest? ›
This means that the investment will take about 12 years to double with a 6% fixed annual interest rate. This calculator flips the 72 rule and shows what interest rate you would need to double your investment in a set number of years.
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.
Why does the rule of 70 work? ›
The reason why the rule of 70 is popular in finance is because it offers a simple way to manage complicated exponential growth. It breaks down growth formulas into a simple equation using the number 70 alongside the rate of return.
What is the golden Rule of 72? ›
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 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.
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)
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.
What is the rule of 114? ›
Similarly, the rule of 114 will tell you how fast your money will triple. In this case, you need to divide 114 by the annual rate of return. For instance, you invest Rs 1 lakh in an instrument that earns 12% return per annum. If you divide 114 by 12, you will see that it will take 9.5 years to triple your investment.
Does the rule of 72 apply to debt? ›
Yes, the Rule of 72 can apply to debt, and it can be used to calculate an estimate of how long it would take a debt balance to double if it's not paid down or off.
How long will it take for you to get $100000.00 if you invest $5000.00 in an account giving you 9.7% interest compounded continuously? ›
t = ln(100,000/5,000)/0.097 ≈ 12.35 years Using the formula for continuous compounding interest, it will take approximately 12.35 years for a $5,000 investment to grow to $100,000 at an interest rate of 9.7% compounded continuously.
How much is $10000 for 5 years at 6 interest? ›
Summary: An investment of $10000 today invested at 6% for five years at simple interest will be $13,000.
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%.
How can you use the Rule of 72 as a strategy in your own life? ›
By dividing 72 by the average inflation rate, you can estimate how long it'll take for the cost of living to double, aiding in long-term financial planning. Visualize the Power of Compounding: By visualizing how quickly investments can grow, the Rule of 72 underscores the importance of compounding.
What is the difference between the rule of 70 and the Rule of 72? ›
The Rule of 70 is a calculation that determines how many years it takes for an investment to double in value based on a constant rate of return. The Rule of 72 is a shortcut or rule of thumb used to estimate the number of years required to double your money at a given annual rate of return and vice versa.
What is the rule of 42 in investing? ›
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.
What is the Rule of 72 and how is it an easy way to determine quizlet? ›
Reason : The Rule of 72 is a formula to approximate the time it will take for a given amount of money to double at a given compound interest rate. The formula is 72 divided by the interest rate earned. In a little over seven years, $100 will double at a compound annual rate of 10 percent (72/10 = 7.2 years).
