Divide 72 by the return and you know how many years your money takes to double. Here is why it is so useful.
Key findings
- At 6% a year, money doubles in about 12 years (72 ÷ 6).
- Going from 4% to 8% makes it double in 9 years instead of 18.
- At 3% inflation, prices double in about 24 years.
The rule in one line
Divide 72 by the annual return and you get roughly how many years it takes for your money to double. At 6% a year: 72 ÷ 6 = 12 years.
How accurate is it?
Very accurate for typical values. The exact figure is the logarithm of 2 divided by the logarithm of (1 + return):
| Annual return | Rule of 72 | Exact years |
|---|---|---|
| 2% | 36.0 | 35.0 |
| 4% | 18.0 | 17.7 |
| 6% | 12.0 | 11.9 |
| 8% | 9.0 | 9.0 |
| 10% | 7.2 | 7.3 |
Three practical uses
- Comparing returns. Going from 4% to 8% does not make your money grow twice as fast in cash terms; it makes it double in half the time: 9 years instead of 18. That is the power of compound interest.
- Understanding inflation. At 3% inflation a year, prices double in about 24 years (23.4 exactly): idle money would buy half as much.
- Seeing the weight of fees. A 1% annual fee on an investment returning 6% leaves 5%: instead of doubling in 12 years, it takes about 14.4.
Its limits
It assumes a constant, reinvested return with no taxes. Real investments go up and down, so it is a quick way to get an idea, not a forecast.
To see the path year by year, with contributions, fees and inflation, use the compound interest calculator.