Rule of 72
Also called: rule of seventy-two
A shortcut for estimating how long money takes to double, by dividing 72 by the yearly return in percent.
Dividing 72 by a yearly growth rate gives the approximate number of years it takes for an amount to double at that rate, with returns reinvested. It works well for rates between about 4% and 15% and becomes less accurate outside that range.
The same rule shows how quickly inflation halves the buying power of money.
Example
At 8% a year, 72 ÷ 8 = 9 years to double; the exact figure is 1.08 raised to the power 9, which is about 2.0.
Learn more in these lessons
- Compounding and CAGRHow does compounding work, and what is CAGR?
Related terms
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