The Rule of 72
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.
To calculate, take the number 72 and divide it by the rate of return you hope to earn. That number gives you the approximate number of years it will take for your money to double.
Based on The Rule of 72, a one-time contribution of $10,000 doubles six more times at 12 percent than at 3 percent over 48 years. Combined with time, you can see why rate of return is key.
| Years | 3% | 6% | 12% |
|---|---|---|---|
| 0 | $10,000 | $10,000 | $10,000 |
| 6 | — | — | $20,000 |
| 12 | — | $20,000 | $40,000 |
| 18 | — | — | $80,000 |
| 24 | $20,000 | $40,000 | $160,000 |
| 30 | — | — | $320,000 |
| 36 | — | $80,000 | $640,000 |
| 42 | — | — | $1,280,000 |
| 48 | $40,000 | $160,000 | $2,560,000 |
This table serves as a demonstration of how the Rule of 72 concept works from a mathematical standpoint. It is not intended to represent an investment. The chart uses constant rates of return, unlike many types of investments which will fluctuate in value. It does not include fees or taxes, which would lower performance. It is unlikely that an investment would grow 10% or more on a consistent basis.
Want to learn More about How Money Works™? Check out these other financial concepts.
Debt
Stacking
The Theory
of Decreasing
Responsibility
Become
an Owner,
Not a Loaner
Dollar
Cost
Averaging
