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You are here: Home / Investing / What’s the Rule of 72?

What’s the Rule of 72?

Published: February 4, 2021 by David Em Updated: June 18, 2022
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The Rule of 72 is a method that’ll tell you how long it’ll take to double your money, given a fixed rate of return.

Graphic of a dollar bill turning into two, and the formula for the Rule of 72.

What’s the Rule of 72?

If you have a fixed annual interest rate, then you can use the Rule of 72 to figure out how long an investment will take to double. It’s a method where you divide 72 by the annual interest rate.

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Although it’s not completely accurate, the method will give you a good idea of the time frame. It can be off by a year or less.

However, it’s a useful shortcut because of how close you can get without having to calculate it using a formula for compound interest. Equations for compound interest will most likely require a calculator.

For example, an investment may offer 6% as the annual rate of return. To figure out how long it’ll take to double, divide 72 by 6, and you’ll get 12 (72/6 = 12). That means it’ll take 12 years for your investment to double.

The Rule of 72 works for any loan or investment that earns or charges compound interest.

More resources:

  • The complete guide to penny stocks
  • How to invest in index funds
  • 10 must-follow financial tips for young adults

Featured graphic by David Em/More Money More Choices.

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About David Em

Founder

David Em is the founder of More Money More Choices, which he launched to help you take control of your finances and build your dream life. Before More Money More Choices, David worked in leadership positions in the finance industry.

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