Rule of 72

What is the Rule of 72?

The Rule of 72 is a shortcut to estimate how many years it takes for your money to double. Divide 72 by your annual interest rate or rate of return.

Formula:

72 ÷ Annual rate = Years to double

For example, at 8% a year: 72 ÷ 8 = 9 years to double.

How it works

Say you invest $10,000 and it earns 8% a year. How long until you have $20,000? You could work through the compound interest math, or you could divide 72 by 8 and get about 9 years.

That's the whole trick. It works for anything that compounds: savings accounts, investments, and debt. To run exact numbers instead, use the compound interest calculator.

Examples

These use hypothetical rates. Plug in the actual rate you're earning or paying.

Investment at 10% a year: 72 ÷ 10 = 7.2 years. A $5,000 investment would grow to about $10,000 in a little over 7 years if it averaged 10%. Real market returns vary year to year, so treat this as a rough average, not a promise.

Savings account at 4%: 72 ÷ 4 = 18 years. Your $1,000 emergency fund would take about 18 years to become $2,000. Savings accounts are great for safety, not for fast growth.

Credit card at 18%: 72 ÷ 18 = 4 years. If you made no payments and the interest kept compounding, a $3,000 balance would grow to about $6,000 in 4 years. That's why high-interest debt is so dangerous. The debt payoff calculator shows how fast you can get out.

How accurate is it?

The rule is most accurate for rates around 6% to 10%, and still within a few months at 3% or 15%.

When to use it

Good for:

• Comparing options quickly. A 9% return doubles in about 8 years, a 6% return in about 12.
• Seeing how fast debt grows if it goes unpaid.
• Rough retirement planning, to picture how a lump sum might grow over decades.

Not great for:

• Very low or very high rates, where the estimate gets rougher.
• Irregular returns, like the stock market, where the actual path is bumpy.
• Regular contributions. The rule is for a single lump sum. If you're adding money every month, use the retirement calculator instead.

Why 72?

The exact math for doubling time is ln(2) ÷ ln(1 + rate), which works out to roughly 69.3 ÷ rate (with the rate as a percent). People use 72 because it's close and easy to divide in your head: it splits evenly by 2, 3, 4, 6, 8, 9, and 12. Some people use 69 or 70 instead for a bit more precision.

Frequently asked questions

Does it work for losses?

Roughly. If an investment loses 8% a year, 72 ÷ 8 suggests it would be cut in half in about 9 years. The actual answer is a little over 8 years.

Can I use monthly or daily rates?

The rule is built for annual rates. Convert a monthly or daily rate to an annual rate first, then divide.

Does it account for taxes, fees, or inflation?

No. It uses whatever rate you give it. For a more realistic estimate, use your return after fees and taxes. If you earn 8% but lose 1% to fees and 2% to taxes, use 5%. To account for inflation, use your real return.

Should I pick investments based on it?

No. Higher returns usually come with higher risk. A promised 15% return doubles in under 5 years on paper, but it could also be very risky or a scam. Use the rule to understand growth, then weigh risk, fees, and your goals. For the bigger picture, see compound interest.