Do you know the Rule of 72? It's an easy way to calculate just how long it's going to take for your money to double.
Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.
As you can see, a one-time contribution of $10,000 doubles six more times at 12 percent than at 3 percent.
| Years | 3% | 6% | 12% |
| 0 | $10,000 | $10,000 | $10,000 |
| 6 | | | $20,000 |
| 12 | | $20,000 | $40,000 |
| 18 | | | $80,000 |
| 24 | $20,000 | $40,000 | $160,000 |
| 30 | | | $320,000 |
| 36 | | $80,000 | $640,000 |
| 42 | | | $1,280,000 |
| 48 | $40,000 | $160,000 | $2,560,000 |
How many doubling periods do you have in your life?
This table serves as a demonstration of how the Rule of 72 concept works from a mathematical standpoint. It is not intended to represent an investment. The chart uses constant rates of return, unlike actual investments which will fluctuate in value. It does not include fees or taxes, which would lower performance. It is unlikely that an investment would grow 10% or greater on a consistent basis.
FAQs
Do you know the Rule of 72? It's an easy way to calculate just how long it's going to take for your money to double. Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.
What is the Rule of 72 in simple terms? ›
What Is the Rule of 72? The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. Dividing 72 by the annual rate of return gives investors a rough estimate of how many years it will take for the initial investment to duplicate itself.
Does the Rule of 72 always work? ›
It's worth noting, the “rule of 72” definition isn't necessarily perfectly accurate because past market results do not predict future market behavior. However, it's a “back of the napkin” way to determine where your portfolio might potentially be in the years ahead.
What is the Rule of 72 69? ›
The Rule of 72 states that by dividing 72 by the annual interest rate, you can estimate the number of years required for an investment to double. The Rule of 69.3 is a more accurate formula for higher interest rates and is calculated by dividing 69.3 by the interest rate.
How long to double money at 7 percent? ›
What Is the Rule of 72?
| Annual Rate of Return | Years to Double |
|---|
| 7% | 10.3 |
| 8% | 9 |
| 9% | 8 |
| 10% | 7.2 |
6 more rowsTry Flipping Things
Another way to double your $2,000 in 24 hours is by flipping items. This method involves buying items at a lower price and selling them for a profit. You can start by looking for items that are in high demand or have a high resale value. One popular option is to start a retail arbitrage business.
Why does the 72 rule work? ›
The value 72 is a convenient choice of numerator, since it has many small divisors: 1, 2, 3, 4, 6, 8, 9, and 12. It provides a good approximation for annual compounding, and for compounding at typical rates (from 6% to 10%); the approximations are less accurate at higher interest rates.
What is the golden Rule of 72? ›
The Rule of 72 is a calculation that estimates the number of years it takes to double your money at a specified rate of return. If, for example, your account earns 4 percent, divide 72 by 4 to get the number of years it will take for your money to double. In this case, 18 years.
What are the flaws of Rule of 72? ›
Errors and Adjustments
The rule of 72 is only an approximation that is accurate for a range of interest rate (from 6% to 10%). Outside that range the error will vary from 2.4% to 14.0%. It turns out that for every three percentage points away from 8% the value 72 could be adjusted by 1.
What is the magic number 72? ›
The magic number
The premise of the rule revolves around either dividing 72 by the interest rate your investment will receive, or inversely, dividing the number of years you would like to double your money in by 72 to give you the required rate of return.
For a 14% rate of return, it would be the rule of 74 (adding 2 for 6 percentage points higher), and for a 5% rate of return, it will mean reducing 1 (for 3 percentage points lower) to lead to the rule of 71. For example, say you have a very attractive investment offering a 22% rate of return.
What is the rule of 144? ›
The formula for the Rule of 144 is, 144 divided by the interest rate equal to the number of years it will take to quadruple your money. For instance: If you invest Rs 1,00,000 with a 12% annual expected return, then the time by which it will gain four times is 144/12 = 12 years.
What is the rule of 73? ›
Lower or higher rates outside of this range can be better predicted using an adjusted Rule of 71, 73 or 74, depending on how far they fall below or above the range. You generally add one to 72 for every three percentage point increase. So, a 15% rate of return would mean you use the Rule of 73.
How do I get 11.5 on my money? ›
You can get more than 11 per cent from a new retail bond if you tie up your money for three years, but it doesn't come without risks.
Does 401k double every 7 years? ›
One of those tools is known as the Rule 72. For example, let's say you have saved $50,000 and your 401(k) holdings historically has a rate of return of 8%. 72 divided by 8 equals 9 years until your investment is estimated to double to $100,000.
How long will it take to double $1000 at 6 interest? ›
This means that the investment will take about 12 years to double with a 6% fixed annual interest rate. This calculator flips the 72 rule and shows what interest rate you would need to double your investment in a set number of years.
What is the Rule of 72 and give an example? ›
For instance, if you were to invest $100 at 9% per annum, then your investment would be worth $200 after 8.0432 years, using an exact calculation. The rule of 72 gives 72/9 = 8 years, which is close to the exact answer. See time value of money. The same applies to exponential decay.
How can I double my money in 5 years? ›
If you pursue a medium-term objective and want your money to be doubled in 5 years, you must seek out investments that offer annualized returns of at least 14.5% (72/5= 14.4). The returns must be higher after adjusting for inflation. Mutual funds are good investment options that can help you generate such returns.
What are three things the Rule of 72 can determine? ›
dividing 72 by the interest rate will show you how long it will take your money to double. How many years it takes an invesment to double, How many years it takes debt to double, The interest rate must earn to double in a time frame, How many times debt or money will double in a period of time.
How long will it take to increase a $2200 investment to $10000 if the interest rate is 6.5 percent? ›
Expert-Verified Answer
It will take approximately 15.27 years to increase the $2,200 investment to $10,000 at an annual interest rate of 6.5%.
