Rule of 72

What It Means

The Rule of 72 is a quick way to estimate how long an amount takes to double when it grows at a steady compound rate. Divide 72 by the yearly rate of return, written as a plain number, and the answer is roughly the number of years. At 6% a year, 72 ÷ 6 gives about 12 years. You can also run it backward: divide 72 by the number of years you have, and you get the rate you'd need.

How People Say It

• "At 8%, that doubles in about nine years."
• "Just run the rule of 72 on it."
• "Seventy-two divided by the rate, that's all it is."

The Breakdown

Formula

Years to double ≈ 72 ÷ yearly rate of return, using the rate as a plain number (6% is 6).

Worked example. Say $5,000 sits in an account earning a steady 6% a year, compoundingCompound interestInterest paid on your original amount and on the interest it has already earned, so each year's interest is a little bigger than the last. See more once a year, and you add nothing more. 72 ÷ 6 = 12, so the balance would reach about $1010,000 stepsA popular daily step goal that began as the name of a 1960s Japanese pedometer; later studies find health benefits begin well below it. See more,000 in roughly 12 years. The exact answer is 11.9 years, and after a full 12 years the balance would be about $10,061.

How close the shortcut gets

What the result means. Your answer assumes the same return every single year. Real investments rise and fall, so use the number to compare rates side by side, and treat it as a rough guide for any real account.

Where It Comes From

The rule appears in Luca Pacioli's Summa de arithmetica, a large survey of the mathematics of the day printed in Venice in 1494. In one problem he says that to find how many years a sum growing at a set yearly rate takes to double, counting profit and capital together, you keep 72 in mind and divide it by the interest rateInterest rateThe yearly percentage a lender charges for borrowing money, not counting fees; the APR adds certain fees to show a fuller cost. See more. The same book is also known for the first published treatment of double-entry bookkeeping.

Good to Know

SEC investor education lessons teach the Rule of 72 alongside compound interest, and Investor.gov offers a compound interest calculator when you want an exact figure. The shortcut only fits growth that compounds at a steady rate. Fees and taxes lower the rate you actually keep, so plug in a return after costs when you estimate. No investment return is guaranteed, and this rule can't tell you what any account will earn.

Related Terms and Categories

• Compound interest

  Interest paid on your original amount and on the interest it has already earned, so each year's interest is a little bigger than the last.

• APY

  A yearly rate showing the total interest a deposit account pays, counting how often interest compounds, as defined by federal Truth in Savings rules.

• Inflation

  A general rise in the prices of goods and services over time, so the same amount of money buys less than it did before.

• Index fund

  A mutual fund or ETF that aims to track the return of a market index, such as the S&P 500, instead of picking investments to beat it.

• Dollar-cost averaging

  Investing the same dollar amount at regular intervals no matter what prices do, so each payment buys more shares when prices are low and fewer when high.

• Savings goal

  A specific amount you plan to save by a set date for one purpose, which turns into a monthly or per-paycheck amount to set aside.

Saving and investing basics