How can you double your money by the “Rule of 72” (2024)

FAQs

What are some examples that the rule of 72 could be useful for you? ›

For example, the Rule of 72 states that $1 invested at an annual fixed interest rate of 10% would take 7.2 years ((72 ÷ 10) = 7.2) to grow to $2. In reality, a 10% investment will take 7.3 years to double (1.10^7.3 = 2). The Rule of 72 is reasonably accurate for low rates of return.

What is the Rule of 72? Here's how it works: Divide 72 by your expected annual interest rate (as a percentage, not a decimal). The answer is roughly the number of years it will take for your money to double. For example, if your investment earns 4 percent a year, it would take about 72 / 4 = 18 years to double.

The classic approach to doubling your money is investing in a diversified portfolio of stocks and bonds, which is likely the best option for most investors. Investing to double your money can be done safely over several years, but there's a greater risk of losing most or all your money when you're impatient.

The rule of 72 can help you get a rough estimate of how long it will take you to double your money at a fixed annual interest rate. If you have an average rate of return and a current balance, you can project how long your investments will take to double.

The accuracy of the rule of 72

For instance, if you were to invest $100 at 9% per annum, then your investment would be worth $200 after 8.0432 years, using an exact calculation. The rule of 72 gives 72/9 = 8 years, which is close to the exact answer.”

How can I double $5000 dollars? One way to potentially double $5,000 is by investing it in a 401(k) account, especially if your employer matches your contributions. For example, if you invest $5,000 and your employer offers to fully match at 100%, you could start with a total of $10,000 in your account.

The Rule of 72 can be leveraged in two different ways to determine an expected doubling period or required rate of return. To calculate the time period an investment will double, divide the integer 72 by the expected rate of return.

How do you double a sum of money? ›

Double Your Money: The Rule of 72

The rule states that an investment or a cost will double when: [Investment Rate per year as a percent] x [Number of Years] = 72. The Rule of 72 indicates than an investment earning 9% per year compounded annually will double in 8 years.

The quickest way to double your money is fold it in half and put it back in your pocket. That's from fellow Oklahoman and hero Will Rogers.

Do you know the Rule of 72? It's an easy way to calculate just how long it's going to take for your money to double. Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.

Number of years to double the money = 72 / Interest Rate

It is a reasonably accurate formula and more so while using lower interest rates than higher ones. If your money is kept in a savings account that earns just 4%, it will take 18 years to double your money.

The rule of 72 is only an approximation that is accurate for a range of interest rate (from 6% to 10%). Outside that range the error will vary from 2.4% to 14.0%. It turns out that for every three percentage points away from 8% the value 72 could be adjusted by 1.

Do you know the Rule of 72? It's an easy way to calculate just how long it's going to take for your money to double. Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.

Applying the rule of 72 to inflation calculations shows you how quickly you can double your money with minimal effort; this rule beautifully demonstrates the magic of compounding for building wealth. Remember that you can only apply this rule to compounding growth or decay.

The number of years it takes for a certain amount to double in value is equal to 72 divided by its annual rate of interest. It is only an approximation. Interest rate must remain constant.

The rule of 70 is useful for all sorts of applications. For example, if you've saved some money in an investment account that's growing at 5% per year, you can divide 70 by 5 to get an approximation for how quickly your savings will double. No complicated math required.