How Long Until My Money Doubles? The Rule of 72 Explained
Want a quick way to estimate how long it takes to double your investment? The Rule of 72 is a simple mental math trick for financial planning.
🎯 Key Takeaways
- The Rule of 72 estimates doubling time: 72 ÷ Annual Interest Rate = Years to Double.
- It's most accurate for interest rates between 6% and 10%.
- Use it to quickly compare investments and understand the cost of inflation.
The Rule of 72 Formula
Years to Double ≈ 72 / (Annual Interest Rate)
How to Use the Rule of 72: Examples
| Interest Rate | Years to Double (Approx.) |
|---|---|
| 3% | 24 years |
| 6% | 12 years |
| 8% | 9 years |
| 12% | 6 years |
Real-World Scenario: Doubling €10,000
Imagine you invest €10,000. At a 4% return, it takes 18 years to become €20,000. At an 8% return, it takes only 9 years. The power of compounding is clear: a small change in rate dramatically changes your timeline.
FAQ: Common Questions
Is the Rule of 72 accurate enough for serious financial planning?
It's excellent for quick estimates but shouldn't replace detailed calculators for major decisions.
How does inflation affect the calculation?
To find the doubling time for your purchasing power, use your real rate of return (interest rate minus inflation rate). If you earn 7% and inflation is 3%, use 4% in the formula (72 ÷ 4 = 18 years).