Rule of 72
A shortcut for estimating how many years it takes money to double: divide 72 by the annual percentage rate of return.
What it means
The rule of 72 gives a quick mental estimate of doubling time for anything growing at a steady compound rate. Divide 72 by the annual rate, written as a whole number, and the result is roughly the number of years to double.
It is an approximation that is most accurate for rates between about 6% and 10%. It also works in reverse: dividing 72 by the number of years gives the rate needed to double in that time. It can also show how fast inflation halves purchasing power, or how quickly debt balances can grow.
Formula
Years to double ≈ 72 ÷ r
- r = annual rate of return as a percentage (8 for 8%)
Example
Suppose an investment grows 8% a year. 72 ÷ 8 = 9, so it doubles in about 9 years. The exact answer is about 9.01 years, so the shortcut is very close.
How it’s used
- Quickly comparing growth at different rates
- Estimating how inflation erodes savings
- Showing why high-interest debt can double fast
Related terms
Educational information only, not financial, tax or legal advice. Rules, limits and rates change; check the IRS, your lender or plan, or a qualified professional before acting.