The Rule of 72: How to Estimate How Fast Your Money Doubles

Doubling your money sounds like a big goal, and it can feel hard to picture how long it might take. A small rise in a yearly return can change the answer by many years, and a small fall can do the same in the other direction. The Rule of 72 gives a quick way to compare returns without a calculator. It is a simple mental shortcut, and it works best as a starting point for learning, not as a promise about any real account.

How fast can your money double?

The Rule of 72 gives a quick estimate. Divide 72 by the yearly return, and the answer is about how many years it takes for money to double. At 8 percent, that is about 9 years, because 72 divided by 8 is 9. At 6 percent, it is about 12 years. The rule is a simple estimate, not a promise.

What is the Rule of 72?

The Rule of 72 is a short way to estimate how long it takes for an amount to double when it grows at a steady yearly rate. You take the number 72 and divide it by the yearly return, written as a whole number and not as a decimal. The result is the rough number of years needed for the money to double. The rule uses compounding, which means growth in one year is added to the balance, and later growth is worked out on that larger balance.

For example, a return of 9 percent gives an answer of 8 years, because 72 divided by 9 is 8. A return of 4 percent gives an answer of 18 years, because 72 divided by 4 is 18. The gap between those two answers is large, and that gap is the main lesson of the rule. A higher return can shorten the wait a lot, while a lower return can stretch it out a lot.

How to use the Rule of 72

Using the rule takes three simple steps. First, choose a yearly return to test, and write it as a whole number, such as 6 for 6 percent. Second, divide 72 by that number. Third, read the answer as years. If you test 6 percent, the sum is 72 divided by 6, which is 12, so the estimate is about 12 years to double. If you test 12 percent, the sum is 72 divided by 12, which is 6, so the estimate is about 6 years.

Examples at 3, 6, 8 and 10 percent

The table below shows the rule at four common rates. The pattern is easy to see. Each time the rate rises, the doubling time falls.

At 3 percent, money takes about 24 years to double. At 6 percent, the time is cut in half, to about 12 years. At 8 percent, it is about 9 years. At 10 percent, it is about 7.2 years. The difference between 3 percent and 10 percent is about 17 years. These are all estimates, and they all assume the same return every year, which does not happen in real life.

Using the rule in reverse

You can also use the rule in reverse. Instead of asking how long doubling takes at a given return, ask what return you would need to double your money in a set number of years. To do that, divide 72 by the number of years. If you want to double in 10 years, the sum is 72 divided by 10, which is 7.2, so you would need about 7.2 percent each year. If you want to double in 18 years, the sum is 72 divided by 18, which is 4, so you would need about 4 percent each year.

What the rule shows about savings account rates

Savings accounts are a good place to see the rule in action, because their rates are often low. If a savings account pays 1 percent a year, the rule gives 72 divided by 1, which is 72 years to double. At 2 percent, it is 36 years. At 0.5 percent, it is 144 years. Those numbers make a simple point. Low rates double slowly, even when the money is safe and the balance is steady. That does not mean a savings account is a bad choice. It is often the right place for money you may need soon, such as an emergency fund.

The same idea for debt

The Rule of 72 also works for debt, and this side of the rule is a warning rather than a goal. If a credit card balance is left unpaid and grows at 18 percent a year, the rule gives 72 divided by 18, which is 4, so the balance could double in about 4 years if no payments are made and no new spending is added. At 24 percent, the sum is 72 divided by 24, which is 3, so the balance could double in about 3 years on the same basis. At 12 percent, it would take about 6 years.

Interest on a card is usually charged more often than once a year, and fees and new spending can add to the balance, so the real result can differ from the simple estimate. Even so, the rule gives a clear sense of speed. A balance that doubles in about 4 years is growing much faster than savings at 2 percent, which would take about 36 years to double.

The limits of the Rule of 72

The rule is an estimate, and it has clear limits. First, it assumes a fixed return every year, but real returns vary. A fund may rise in one year, fall in the next, and rise again after that. Second, the rule is most accurate for returns in the middle range, roughly from about 5 percent to about 12 percent. Third, the rule ignores taxes, fees, and inflation. Taxes can reduce the amount you keep, fees can reduce the growth of a fund, and inflation can reduce what the money will buy in the future.

Worked example: $1,000 at an example 8 percent

Example only. This is a made up example to show how the rule works. It is not a promise of returns, and it is not a prediction about any real account.

Start with $1,000. Suppose the yearly return is an example 8 percent, and suppose it stays the same each year. The rule says to divide 72 by 8, which is 9, so the money should double in about 9 years. That means the $1,000 would grow to about $2,000 in about 9 years. After another 9 years, the $2,000 would grow to about $4,000, if the same example return continued. The starting amount does not change the doubling time. Whether you start with $100, $1,000, or $10,000, the time to double depends on the rate, not on the amount.

How to use the rule without making mistakes

• Use it to compare rates, not to predict a date.
• Test a low rate as well as a high rate.
• Remember fees, taxes, and inflation, which the rule leaves out.
• Remember that returns vary, and a past return does not tell you what will happen next.
• Use the debt version of the rule to see how fast an unpaid, high rate balance can grow.

The Rule of 72 is most useful when it is kept simple. Pick a rate, divide 72 by that rate, and read the answer as years. Then ask whether that time frame fits your goal, and whether the rate you picked is realistic for the account you have in mind.

Quick answers

Related guides

• How Much Money Do I Need to Start Investing?
• How Much Do You Need in a 401(k) to Retire?
• Best Investing Apps for Beginners

Further reading

• Investor.gov: Investment Products, from the U.S. Securities and Exchange Commission, for plain learning material about investment products and basics.

This content is educational only. It is not financial advice.