## What Is The Rule Of 72?

If you understand how compound interest works, you know that earning 10% per year will double your money in less than 10 years, but how long will it take? With some math, you can determine that it takes 7.27 years. That’s cool, but you’re in a hurry, and you don’t have time to be running all sorts of numbers. All you want to know is, how quickly will I double my money? The good news is there is a simple method to roughly determine this. It’s called the Rule of 72, and all you need to do is take the number 72 and divide it by the interest rate that you expect to receive. In the example above if we assume that the stock market is going to return 10%, it will take roughly 7.2 years for us to double our money.

The Rule of 72 can be applied numbers of all sizes, and it will always provide you with a quick and reasonably accurate answer. However, it is important to remember times that these values are rough. They will also stray further from the truth with extreme interest rate inputs. For example, if you ask how long it takes to double your money with an interest rate of 1%, the Rule of 72 would say 72 years. The actual answer is 69.66 years. Similarly, if you asked how long would it take to double my investment with an interest rate of 72% per year. The Rule of 72 would say 1 year, but it would actually take 1.28 years.

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