The Rule of 72 answers "When will my investment double?"
The rule of 72 finds the number of years to double your money at a given interest rate. Doing the math in your head is easy. Take 72 and divide by the interest rate. When you divide by the interest rate use the number without decimals. Example: 8% is 8. 10% is 10. This is a great rule to know so you can figure out the number of years for a number to double. You can also go the other way and figure out what is the annual interest rate.
Examples of the rule of 72
- If I Invest $1,000 at 8% annual inteest rate, when will my money double? The answer is 9 years. 72/8 = 9 years - A city's population is growing at 6%. When will the population double? The answer is 12 years. 72/6 =12 years - We want to double our population or investment in 10 years. What interest rate will get us there? The answer is 72/10 = 7.2%
The rule of 72 is 2 months off at 20%, and three months off at 25%.
**NOTE**: I have an updated blog post dated April 2021, where I test to see **[how accurate the Rule of 72 is by using Excel's NPER Function](https://chrismenardtraining.com/post/the-rule-of-72-explained-using-excel-and-the-nper-function)**.
YouTube video on the rule of 72
The Rule of 72 demonstrated in Excel by Chris Menard
