The rule of 72 is a quick way to show how long it will take to
double your money depending on the interest rate. If you take 72
divided by an annual interest rate, the answer will tell you how
many years it will take to double your money.
The math equation for the rule of 72 is:
Year for money to double = 72 / annual interest rate
At 8% interest, it will take 9 years for your money to double.
(72/8 = 9)
Here are more examples:
At 6%, it will take 12 years (72/6 = 12)
At 12%, it will take 6 years (72/12 = 6)
At 15%, it will take 4.8 years
(72/15 = 4.8)
The rule of 72 is a short cut to estimate the magic of compound
interest that makes your money grow.
The rule of 72 works the other way as well, telling you the year
of losing purchase power due to inflation.
If the inflation rate is 4%, how long will it take to lose half of
your purchasing power? (A dollar today is only worth 50 cents in
the future year)
Estimate the answer:
Less than 10 years
Between 10 and 20 years