Rule of 72: How long for money to double

May 17, 2012 — Leave a comment

Use the rule of 72 to figure out how long it will take your money to double at different interest rates. All you do is divide 72 by the interest rate and the product equals the number of years to double.

For example, if you assume a 10% interest rate, the rule of 72 work as follows:

72/10 = 7.2 years for your money to double

I like to use this rule to forecast how much money I’ll have for retirement. For example, if I assume I have 35 years for my money to grow (from now until age 65), it would double almost 5 times at a 10% return (35/7.2 = 4.86). That means $10,000 would turn into approximately:

Double 1 = $20,000

Double 2 = $40,000

Double 3 = $80,000

Double 4 = $160,000

Double 5 = $320,000

This is additional proof of why it’s important to start investing today and to consistently invest over the long term.

At 12% interest, it will only take 6 years to double (72/12 = 6), but at 2% interest, it will take 36 years to double (72/2 = 36)!!

I like the rule of 72 because you can quickly do the math in your head to see how long it will take your money to double. However, it’s not exact and it doesn’t work real well if you’re trying to factor in additional payments. If you want to see how long it will take you to reach $1,000,000 with different interest rates, check out this post.

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