# Rule of 72 The Rule of 72 is a simple calculation that can be used to estimate the amount of time it will take for an investment to double, no calculator necessary! Well I concede, maybe a basic one…unless you can divide numbers like 3.4 into 72 in your head, in which case, props to you…but most probably can’t, so grab a simple four function calculator and you will be completing compound interest problems in no time!

Example:

I am going to invest \$1,000 in a money market account with a yearly interest rate of 2%. To estimate how long it would take my \$1,000 to become \$2,000 I would divide 72 by the interest rate of 2 (72 / 2). The answer, 36, is about how many years it would take for my initial investment of \$1,000 to double. The actual amount of time it would take is 35.003 years, as you can see; using this rule we can get fairly accurate answer with no complicated math!

Bonus uses for the rule of 72

There are two other ways this rule can be utilized. First we can use it to see the effect of inflation on our purchasing power and second, to determine the interest rate required to double an investment in a certain amount of years.