The Rule of 72: How Long Until Your Money Doubles
When you are growing money through compounding, a natural question comes up: at this pace, how long until it doubles? The exact answer needs logarithms, but there is a way to estimate it in your head, with no paper or calculator. It is usually called the Rule of 72.
It could not be simpler: divide 72 by the annual rate, and you get roughly the number of years for your money to double. At 6% a year, that is 72 ÷ 6, or about 12 years.
Why one division works
Solve the exact doubling condition for compounding and you get about 69.3. But 72 divides cleanly by 2, 3, 4, 6, 8, and 9, so it is used instead to keep the mental math easy.
That makes the Rule of 72 not a precise answer but a close estimate. In the common 6-to-10-percent range, it barely differs from the exact figure.
Time to double, by rate
The higher the rate, the faster the time to double shrinks. Here is the Rule of 72 estimate next to the actual value.
| Annual rate | Rule of 72 | Actual |
|---|---|---|
| 2% | 36 years | about 35 years |
| 4% | 18 years | about 17.7 years |
| 6% | 12 years | about 11.9 years |
| 8% | 9 years | about 9 years |
| 12% | 6 years | about 6.1 years |
You can see the pattern: double the rate and the time to double drops by nearly half.
Not just money — inflation too
You can flip the rule around. Put in the inflation rate instead of a return, and it estimates how long until money loses half of its purchasing power. If prices rise 3% a year, 72 ÷ 3 is about 24 years for the same money to buy roughly half as much.
Of course, the Rule of 72 is a back-of-the-envelope estimate. It drifts at very low or very high rates, and it does not apply to simple interest. When you need the exact amount, it is safer to enter the principal, rate, and time and calculate it.