There’s a little math trick that investors love to share at dinner parties. It isn’t as flashy as predicting the next hot stock or timing the crypto market, but it sticks in your head. It’s called the Rule of 72.
The first time I heard it, I was at a coffee shop with a friend who had just started working in finance. She leaned in and scribbled on a napkin: “Divide 72 by your interest rate, and that’s how many years it’ll take for your money to double.”
I blinked. “That’s it?”
She nodded. “That’s it.”
It felt almost suspiciously simple. No spreadsheets, no complex formulas, no long-winded lectures about compounding. Just 72, a division sign, and your rate of return.
But simplicity can be deceptive. The Rule of 72 isn’t magic—it’s an approximation. Still, it’s a surprisingly useful one, especially when you’re trying to make quick mental calculations about your savings, investments, or even debt.
The Math Behind the Magic
Let’s start with the basics.
If you have an investment that earns a steady annual rate of return, your money grows due to compound interest—interest earned on both your original balance and the interest already accumulated. The exact formula to calculate doubling time looks like this:
Doubling Time = ln(2) ÷ ln(1 + r)
Where r is your annual return rate.
Now, that’s a mouthful for most people. Unless you’re the kind of person who enjoys punching natural logarithms into a calculator, you’re unlikely to remember it.
This is where the Rule of 72 swoops in. Instead of logs and formulas, you just take:
72 ÷ Rate of Return (%) = Years to Double.
So, if your investment earns 6% annually, 72 ÷ 6 = 12 years to double.
That’s not just easier to remember—it’s good enough for everyday conversations about money.
A Few Real-Life Examples
Let’s make this more concrete.
-
A savings account paying 2% interest: 72 ÷ 2 = 36 years to double. (Ouch. That’s a long wait.)
-
A stock portfolio averaging 8% annual returns: 72 ÷ 8 = 9 years to double.
-
A high-yield bond at 4%: 72 ÷ 4 = 18 years.
-
Credit card debt charging 18%: 72 ÷ 18 = 4 years—your debt doubles against you that quickly.
That last example usually makes people sit up. Because yes, the Rule of 72 works in reverse. It doesn’t just show how fast your money grows, but also how quickly it can shrink if you’re on the wrong side of compounding interest.
Where Does “72” Even Come From?
It might feel arbitrary—why not 70, or 75?
Mathematically, the true constant is closer to 69.3, since ln(2) ≈ 0.693. But using 72 makes the arithmetic easier because it divides neatly by a lot of numbers: 2, 3, 4, 6, 8, 9, 12. That means you can quickly estimate doubling times for a wide range of interest rates without struggling.
Think of it as a compromise between precision and convenience. The Rule of 72 isn’t perfect, but it’s practical.
When the Rule of 72 Works Well—and When It Doesn’t
Here’s where a little skepticism is useful.
The Rule of 72 works best for interest rates between 5% and 12%. Outside that range, the approximation starts to wobble. For example:
-
At 1% interest, the actual doubling time is about 69 years, but the Rule of 72 says 72 years. Close enough.
-
At 20%, the real doubling time is 3.8 years, while the Rule says 3.6 years. Still acceptable.
-
At 50% (which you’re unlikely to see outside of speculative bubbles), the difference gets larger.
So while the Rule of 72 is a neat shortcut, it’s not gospel.
A Quick Story: The Rule of 72 at Work
I once had a conversation with my younger cousin, who had just started her first job. She wanted to know if putting her savings in a “safe” bank account was enough.
We pulled out her banking app. The account was paying 1.5% annual interest. I grabbed a notepad:
72 ÷ 1.5 = 48 years.
Her jaw dropped. “You mean if I save $1,000, it won’t become $2,000 until I’m nearly 70?”
Exactly. That moment hit her harder than any lecture I could have given. And it nudged her toward considering mutual funds and ETFs instead of letting her money nap in a savings account forever.
Using the Rule of 72 for Different Scenarios
1. Retirement Planning
Let’s say you’re 30 and start investing in a stock index fund earning around 7% per year. According to the Rule of 72, your money doubles roughly every 10 years.
So $10,000 at age 30 becomes:
-
$20,000 by age 40
-
$40,000 by age 50
-
$80,000 by age 60
-
$160,000 by age 70
And that’s without adding anything new. With regular contributions, the numbers get much bigger.
2. Debt Awareness
If you’re carrying high-interest debt, the Rule of 72 can be a rude wake-up call. A 24% store credit card? 72 ÷ 24 = 3 years. That’s how fast your balance doubles if you only make minimum payments.
It’s sobering, but it can also be motivating—because once you see the math in plain sight, the urgency to pay it off grows.
3. Inflation Reality Check
The Rule of 72 doesn’t just apply to investments. It works for inflation, too.
If inflation averages 3%, the cost of living doubles in about 24 years. That $50 grocery bill today? It’s more like $100 in the future.
This is why parking all your savings in a low-interest account may actually lose you money in real terms.
A Little Critique: The Rule Isn’t Everything
Here’s the thing: while the Rule of 72 is handy, leaning on it too heavily can oversimplify reality.
Markets are not smooth and predictable. A 7% average return may hide the fact that one year your portfolio gains 20% and another year it drops 15%. The Rule assumes consistent compounding, which isn’t how markets really behave.
Also, taxes and fees eat into returns. An 8% investment return with a 1% management fee effectively becomes 7%. That one percentage point changes your doubling timeline.
So the Rule of 72 is best seen as a conversation starter, not a financial plan.
Tweaks and Alternatives
Some people prefer the Rule of 70 for more accuracy at lower rates. Others even use the Rule of 69.3, which is mathematically exact but far less convenient.
There’s also the Rule of 114 (for tripling) and the Rule of 144 (for quadrupling). They work the same way, just with different numerators.
Why People Love It Anyway
Despite its flaws, the Rule of 72 has a staying power. Why? Because humans like simple rules.
We’re more likely to remember, use, and share a neat trick than a messy equation. It’s why you’ll hear financial educators, advisors, and even parents explaining it to teenagers as their first lesson in compound interest.
And once you’ve seen the Rule in action—whether for your savings, your debt, or just to marvel at how inflation sneaks up—it tends to stick.
Final Thoughts
The Rule of 72 isn’t a perfect tool, but it’s a powerful reminder of how time and compounding can work either for or against you.
Want your money to double faster? You’ll need a higher rate of return (balanced with risk you can stomach). Want to avoid your debt spiraling? Pay down high-interest balances before they get the chance to snowball.
The beauty of the Rule is that it makes all this instantly clear. Just a quick calculation, no fancy math degree required.
So next time someone asks why they should invest rather than let money sit in a savings account—or why paying off debt is urgent—grab a napkin, write “72 ÷ rate = years,” and watch the lightbulb go off.
It worked for me. And chances are, it’ll work for them too.