Rule of 72
The Rule of 72 is a quick way to estimate how long an investment takes to double: divide 72 by the annual rate of return. At 8% a year, money doubles in about 9 years. It works best for moderate rates.
Compound interest is powerful but hard to picture. The Rule of 72 makes it instant: one division tells you roughly how many years it takes to double your money — or, for inflation, how long until prices double. This entry explains the rule, how accurate it is and its useful variations.
- Category
- Trading Basics
- Reading time
- 3 min
- Also called
- Rule of seventy-two, Doubling rule, Rule of 70
- Updated
The Rule of 72 in plain words
The Rule of 72 estimates how long an investment takes to double at a fixed annual rate of return, by dividing 72 by that rate.1
It is fairly accurate, especially at lower interest rates, and applies to compound interest.1
Compound interest means earning interest on both your original money and the interest already earned.2
How to use the Rule of 72, step by step
Take the annual rate
As a whole number: 6% → 6.
Divide 72 by it
72 ÷ 6 = 12 years to double.
Reverse it
72 ÷ years = rate needed.
Apply to inflation
Years until prices double. See Inflation.
Apply to fees
How fast fees compound against you. See Expense Ratio.
Check exact maths
For high rates, use the compound formula. See Compound Interest.
Worked examples
Example 1 — Doubling time
≈ 9 yearsAn investment earns 8% a year.
| Rule of 72 | 72 ÷ 8 = 9 years |
| Exact | 1.08^9 ≈ 2.00 |
Dividing 72 by the annual rate gives the approximate doubling time.1
Example 2 — Required return
≈ 12% neededYou want to double your money in 6 years.
| Rate needed | 72 ÷ 6 = 12% a year |
The rule works both ways, giving the rate needed for a target doubling time. See Compound Annual Growth Rate.
Example 3 — Inflation halving money
≈ 18 yearsInflation runs at 4% a year.
| Prices double in | 72 ÷ 4 = 18 years |
| Cash buying power | Roughly halves |
The same maths shows how quickly inflation erodes cash. See Inflation.
Rule of 72 vs exact doubling time
| Aspect | Rule of 72 | Exact |
|---|---|---|
| 2% | 36 years | ≈ 35.0 years |
| 6% | 12 years | ≈ 11.9 years |
| 12% | 6 years | ≈ 6.1 years |
| 24% | 3 years | ≈ 3.2 years |
Where the Rule of 72 helps
Comparing investments
Quick sense of growth speed.
Retirement planning
How many doublings before retirement. See Time Horizon.
Debt
How fast high-interest debt balloons.
Fees
Long-term cost of high fees. See Expense Ratio.
Advantages and disadvantages
Advantages
- Instant mental calculation.
- Makes compounding intuitive.
- Works for growth, inflation and debt.
Disadvantages
- Only an approximation.
- Less accurate at high rates.
- Assumes a constant rate.
Going deeper
Read as far as you need. Each level builds on the one before it.
Why 72
Beginner
72 divides easily by many numbers (2, 3, 4, 6, 8, 9, 12), which makes mental maths simple.
Accuracy
Intermediate
The rule is most accurate at lower rates; at high rates the estimate drifts from the exact answer.1
Rule of 69 and 70
Advanced
For continuous compounding, 69.3 is more exact; 70 is often used for low rates such as GDP growth or inflation. See Present and Future Value.
Common mistakes
Using decimals
Use 8, not 0.08.
Expecting precision
It's an estimate.
Ignoring volatility
Real returns vary year to year.
Forgetting fees and taxes
Net return sets the doubling time.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Years to double ≈ 72 ÷ annual rate.
- It also gives the rate needed for a target.
- It works for inflation and debt too.
- It is most accurate at moderate rates.
- It assumes compounding at a steady rate.
Frequently asked questions
Is the Rule of 72 accurate?
Can I use it for monthly rates?
What is the Rule of 114?
Further learning
- Compound Interest
The maths behind the rule.
- Compound Annual Growth Rate
Measuring growth rates.
- Inflation
Applying the rule to prices.
- Present and Future Value
Exact time-value maths.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- Corporate Finance Institute. Rule of 72 (opens in a new tab) Checked .
- Investor.gov (SEC). What is compound interest? (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.