The Rule of 72: Mental Math for Investment Doubling
The Rule of 72 is a beautifully simple formula that lets you calculate how long it takes for an investment to double at a given interest rate: divide 72 by the annual return rate, and you get the approximate number of years to double your money.
Earning 8% annually?
72 ÷ 8 = 9 years to double.
Getting 12% returns?
72 ÷ 12 = 6 years.
This mental math trick works remarkably well for rates between 6% and 12%, with less than 1% error compared to the exact logarithmic calculation.
The Rule of 72 reveals the extraordinary power of compound interest and makes abstract percentage returns tangible.
At 6% returns, your money doubles every 12 years—so $10,000 becomes $20,000 in 12 years, $40,000 in 24 years, $80,000 in 36 years, and $160,000 in 48 years.
At 10% returns, you get five doublings over 35 years, turning $10,000 into $320,000.
The difference between 6% and 10% returns might sound small, but over decades, it's transformative.
This rule also works in reverse to calculate required returns: if you need to double your money in 10 years, you need 72 ÷ 10 = 7.2% annual returns.
Investors use the Rule of 72 to quickly evaluate opportunities—a investment promising to "double in 3 years" would need 72 ÷ 3 = 24% annual returns, which should trigger skepticism about risk or legitimacy.
The rule also applies to inflation's destructive power: at 3% inflation, your purchasing power halves every 24 years, meaning $100,000 in today's dollars equals just $50,000 in purchasing power in 24 years.
For more precise calculations with very high or very low rates, financial mathematicians use the Rule of 69.3 (the natural logarithm of 2 times 100) or the Rule of 70, but 72 is preferred because it has more divisors (1, 2, 3, 4, 6, 8, 9, 12, 18, 24, 36, 72), making mental math easier.