The Rule of 72: How Fast Your Money, and Prices, Double

The short answer

The rule of 72 says: years to double ≈ 72 ÷ yearly rate. Investor.gov, the investor education site of the US Securities and Exchange Commission, gives the example of a 9% return: 72 ÷ 9 = 8, so the money doubles in about eight years.

Use the rate as a plain number, not a decimal. At 6%, divide 72 by 6, not by 0.06. The answer is about 12 years.

Why it works: growth earns growth

Doubling happens because of compound interest. The Consumer Financial Protection Bureau uses 1,000 at 5% a year as its example: 50 of interest in the first year makes 1,050, and the second year's 5% is worked out on 1,050, adding 52.50. The amount added grows every year, so the balance climbs faster over time.

The exact doubling time needs logarithms, which few people work out in their heads. 72 is a handy stand-in because it divides cleanly by 2, 3, 4, 6, 8, 9 and 12, and it lands close to the exact answer across everyday rates.

How close is the shortcut?

Here is the rule against the exact answer for money that grows once a year:

1. 2% a year: the rule says 36 years; the exact answer is 35.0.
2. 3%: the rule says 24; exact 23.4.
3. 4%: the rule says 18; exact 17.7.
4. 6%: the rule says 12; exact 11.9.
5. 8%: the rule says 9; exact 9.0.
6. 10%: the rule says 7.2; exact 7.3.
7. 12%: the rule says 6; exact 6.1.

Between about 6% and 10%, the rule is almost exact. At low rates it runs slightly long and at high rates slightly short, but it stays close enough for a quick sense of scale.

Use it for prices: inflation halves your cash

The same maths applies to prices. At 3% inflation, prices double in about 24 years by the rule, or 23.4 exactly. That means money kept as cash buys about half as much after the same time. At 6% inflation, it happens in about 12 years.

Our inflation calculator shows the exact doubling time for any rate, what a price today could cost later, and your real return after inflation. For why prices stay high even when inflation falls, read our explainer on falling inflation.

Use it for debt: the rule works against you too

Interest on a debt compounds the same way. A balance left untouched at 24% a year would double in about three years by the rule. Card interest is usually charged monthly, which makes it a little faster: at 2% a month, a balance doubles in about 35 months if nothing is paid.

Minimum payments slow this down, but can leave you paying for many years. Our credit card payoff calculator shows how long your balance really takes to clear.

Use it backwards: what rate would you need?

Flip the rule to find the rate needed to double money in a given time: rate ≈ 72 ÷ years. To double in 10 years you need about 7.2% a year. To double in 6 years, about 12%. Be very sceptical of anyone promising to double your money much faster than that with no risk.

Where the rule falls short

1. It assumes a steady rate. Investment returns go up and down and are never guaranteed.
2. It ignores new money. If you add to your savings every month, the balance doubles much sooner.
3. It ignores fees and tax, which lower the rate you actually keep.
4. It is a rounding tool. For a plan you will act on, use exact figures.

For exact figures with a starting amount, monthly deposits and your own timeframe, use our compound interest calculator. It also shows what starting later would cost. To turn a target into a monthly amount, read how much to save each month for a goal.

Educational content, not financial advice.

Sources

• Investor.gov (US Securities and Exchange Commission): What is compound interest?
• Consumer Financial Protection Bureau: How does compound interest work?