The Rule of 72 is one of the most useful mental math shortcuts in finance. It tells you, in seconds and without a calculator, approximately how many years it takes for an investment — or a debt — to double at a given interest rate.
The Formula
Years to Double = 72 ÷ Annual Interest Rate (%)
That is it. If your investment earns 8% per year, it doubles in roughly 9 years (72 ÷ 8 = 9). If your savings account earns 4%, it takes 18 years to double (72 ÷ 4 = 18).
You can also rearrange it: if you want your money to double in 6 years, you need an annual return of 12% (72 ÷ 6 = 12).
Doubling Times at Common Interest Rates
| Annual Return | Years to Double | What This Looks Like |
|---|---|---|
| 1% (savings account) | 72 years | Money barely grows |
| 2% (high-yield savings) | 36 years | Beats inflation, barely |
| 4% (bonds / CDs) | 18 years | Doubles in a generation |
| 6% (balanced portfolio) | 12 years | Doubles every decade |
| 8% (equity index fund) | 9 years | Doubles roughly every decade |
| 10% (aggressive equity) | 7.2 years | Doubles ~5x in 36 years |
| 12% (CAGR, active investing) | 6 years | Uncommon long-term |
| 24% (credit card APR) | 3 years | Doubles your debt |
Rule of 72 for Inflation
You can use the Rule of 72 in reverse to see how inflation erodes purchasing power. At 3% inflation, prices double in 24 years (72 ÷ 3). At 6% inflation, they double in just 12 years.
This means a retiree on a fixed income of $50,000/year will have the purchasing power of only $25,000/year within 24 years at modest 3% inflation.
Accuracy: How Close Is the Rule of 72?
The rule is an approximation, not exact. Here is how it compares to the precise compound interest formula:
| Interest Rate | Rule of 72 | Exact | Error |
|---|---|---|---|
| 2% | 36.0 years | 35.0 years | 2.9% |
| 6% | 12.0 years | 11.9 years | 0.8% |
| 9% | 8.0 years | 8.0 years | 0.0% |
| 12% | 6.0 years | 6.1 years | 1.6% |
| 20% | 3.6 years | 3.8 years | 5.3% |
The rule is most accurate between 6% and 10% — the range where most long-term equity investments operate. At very high rates (above 15%), use 69 instead of 72 for better accuracy.
Practical Applications
1. Evaluating a job offer with a raise: A 6% annual raise doubles your salary in 12 years. A 4% raise takes 18 years. Over a 30-year career, that difference is enormous.
2. Comparing savings accounts: At 0.5% (many traditional bank accounts), your money doubles in 144 years. At 4.5% (competitive HYSA), it doubles in 16 years.
3. Understanding debt growth: A credit card charging 18% APR doubles any balance you carry in just 4 years (72 ÷ 18 = 4) if you make no payments.
Model It Precisely
The Rule of 72 is excellent for mental math, but for actual financial planning you need exact numbers. Use our Compound Interest Calculator to see a precise year-by-year breakdown of any investment scenario.
For comparing investment returns over time, our CAGR Calculator calculates the exact annualised growth rate between any two values.
Frequently Asked Questions
Q: How do you calculate doubling time with the Rule of 72? A: Divide 72 by the annual interest rate as a whole number — for example, 72 ÷ 8 = 9 years to double an investment earning 8% per year.
Q: How accurate is the Rule of 72? A: It is most accurate between 6% and 10%, where the error is under 1% (for example, only 0.0% error at 9%); at very high rates above 15%, using 69 instead of 72 gives a closer approximation.
Q: Can the Rule of 72 be used for debt or inflation, not just investing? A: Yes. At 3% inflation, prices double in 24 years (72 ÷ 3), and a credit card charging 18% APR doubles an unpaid balance in just 4 years (72 ÷ 18) if no payments are made.
