Rule of 72
Divide 72 by the yearly rate to find, roughly, how many years it takes a sum to double.
What is the rule of 72?
The rule of 72 is a shortcut for mental arithmetic. Divide 72 by the annual rate in per cent and you get, roughly, the number of years a sum takes to double.
At 6% a year, money doubles in about 12 years. At 3%, in about 24. At 9%, in about eight.
It works for inflation too, in reverse: at 6% inflation a year, the buying power of cash halves in about 12 years.
It is an approximation. At 5% the rule gives 14.4 years and the exact answer is 14.2. For rates between 2% and 12% the error is small.
Inflation of 8% a year: prices double in about nine years.
How accurate is the rule of 72?
For rates between 2% and 12% the error is a few months. At 5% the rule gives 14.4 years; the exact answer is 14.2.
Can I use the rule of 72 for inflation?
Yes. At 6% inflation a year, the buying power of cash halves in about 12 years.
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This page explains mechanisms and shows what happened in the past. It does not recommend products, say what to buy, or take your situation into account.