The Rule of 72: Estimate How Fast Money Doubles
The Rule of 72 is a quick way to estimate how many years it takes an investment to double at a given interest rate.
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Frequently asked questions
What is the Rule of 72?
It is a shortcut that estimates how many years money takes to double: divide 72 by the annual interest rate written as a whole number.
How accurate is the Rule of 72?
It is quite accurate for rates between roughly 6% and 10%, and drifts slightly outside that band. The exact figure comes from the compound interest formula.
Can the Rule of 72 measure inflation?
Yes. Dividing 72 by the inflation rate estimates how many years it takes for prices to double and spending power to halve.
How do I find the rate needed to double in a set time?
Divide 72 by the number of years. To double in 8 years you need about 72 ÷ 8 = 9% a year.
The Rule of 72: Estimate How Fast Money Doubles
The Rule of 72 is a mental shortcut for compound growth: divide 72 by the annual interest rate (as a whole number) to estimate the years it takes money to double.
Years to double ≈ 72 ÷ interest rate (%)
Worked examples
| Rate | 72 ÷ rate | Years to double |
|---|---|---|
| 4% | 72 ÷ 4 | ~18 years |
| 6% | 72 ÷ 6 | ~12 years |
| 9% | 72 ÷ 9 | ~8 years |
| 12% | 72 ÷ 12 | ~6 years |
It works in reverse too
Divide 72 by the years you have to find the rate you would need: to double in 9 years you need about 72 ÷ 9 = 8% a year. The same idea shows how inflation halves spending power — at 3% inflation, prices roughly double in 24 years.
How accurate is it?
The rule is most accurate for rates between about 6% and 10%. For very high or very low rates it drifts a little; the exact answer comes from the compound interest formula, but 72 is close enough for quick mental math.
Examples are illustrative and for general education, not financial advice.
Results are estimates for general guidance in Canada and may not reflect the latest local rates, fees or rules. Check official sources before making decisions.