4.3 The Rule of 72

Notes

The Rule of 72 estimates how long it takes money to double with compound growth.

• $\displaystyle \text{Years to double} \approx \frac{72}{\text{rate in percent}}$.
• Example: at 6% it takes about $\displaystyle \frac{72}{6} = 12$ years to double.
• You can also estimate the rate needed: $\displaystyle \text{rate} \approx \frac{72}{\text{years}}$.
• It is an approximation and works best for rates from about 4% to 12%.
• Each doubling doubles the previous amount: $500, $1,000, $2,000...