The Rule of 72 tells you when your money doubles
Divide 72 by an interest rate and you get, near enough, the years it takes savings to double - a quick window onto the power of compounding.
Compound interest is interest paid on your original principal and on the interest it has already earned. Because each period’s growth gets added to the base, savings don’t grow in a straight line - they accelerate.
The Rule of 72 is a mental shortcut for that acceleration. Divide 72 by the annual interest rate, and the answer is roughly how many years it takes a sum to double. At 6% money doubles in about 12 years (72 / 6); at 10% in about 7 years (72 / 10); at a meagre 3%, it takes around 24 years.
The rule works because doubling is exponential, and 72 is a convenient number - it divides cleanly by 2, 3, 4, 6, 8, 9, and 12. It’s an approximation, most accurate for rates between roughly 6% and 10%, but it captures the headline lesson of finance: small differences in return, compounded over decades, lead to dramatically different outcomes.
Sources & references
2 referencesWell-established. Corroborated by 2 independent sources.
