Rule of 72 Calculator
Result
Approximate doubling time: years
What is the Rule of 72?
The Rule of 72 is a simple mathematical formula used to estimate the number of years it takes for an investment to double in value. It’s a useful tool for investors to gauge the potential growth of their investments.
How to Use the Rule of 72:
- Identify the Interest Rate: Determine the annual interest rate or rate of return on your investment.
- Divide 72 by the Interest Rate: Divide 72 by the interest rate to get an approximate number of years.
For example:
- If you invest at a 10% annual interest rate, it will take approximately 72 / 10 = 7.2 years for your investment to double.
Limitations of the Rule of 72:
- Approximation: The Rule of 72 is an approximation, and the actual doubling time may vary slightly, especially at higher interest rates.
- Compounding Frequency: It assumes continuous compounding, which may not be the case for all investments.
Using the Rule of 72 Effectively:
- Investment Planning: The Rule of 72 can help you set realistic investment goals and timeframes.
- Comparing Investments: You can compare different investments based on their estimated doubling times.
- Financial Education: It’s a simple concept that can be used to educate people about the power of compound interest.