The Rule of 72

The Rule of 72 is the most useful mental math shortcut in personal finance. No spreadsheet required.

The Formula

Divide 72 by your annual interest rate. The result is approximately how many years it takes for your money to double.

Years to double = 72 ÷ Annual Rate (%)

Examples

• Investing at 7% annually: 72 ÷ 7 = ~10.3 years to double
• High-yield savings at 5%: 72 ÷ 5 = ~14.4 years to double
• Credit card debt at 24%: 72 ÷ 24 = 3 years for your balance to double
• Inflation at 3%: 72 ÷ 3 = 24 years for prices to double (your cash to lose half its value)

Why It Matters

The Rule of 72 works in both directions. It shows you how fast your money grows - and how fast debt or inflation destroys it.

Credit card companies aren't confused about this math. They charge 20-30% APR specifically because it means your balance doubles in 2-3 years if you pay minimums. You should understand the same math they're running on you.

The Rule of 72 and compound interest

The Rule of 72 is the shortcut. Compound interest is the engine it approximates. To see why those numbers get so large over time, and why starting early beats starting big by a wider margin than most people expect, read Compound interest and why time beats money.

Limitations

It's an approximation. For rates under 20%, it's accurate within a percent or two. For very high rates or very long periods, use the full compound interest formula. But for mental math and quick comparisons, 72 is accurate enough to be genuinely useful.

Related

• Compound interest and why time beats money: the full story behind the math this rule shortcuts
• Inflation: the silent tax: the Rule of 72 applied to purchasing power (at 3% inflation, prices double in 24 years)

The Rule of 72 is not magic. It's arithmetic. The math doesn't care about your age, your income, or your excuses. It just runs.