How it works
The formula is as simple as: years to double ≈ 72 ÷ annual interest rate. You don't need capital or contributions to use it: just the expected interest rate.
| Annual interest | Years to double (approx.) |
|---|---|
| 3% | 24 years |
| 4% | 18 years |
| 6% | 12 years |
| 7% | ~10.3 years |
| 9% | 8 years |
| 12% | 6 years |
Where does the number 72 come from?
It comes from a mathematical approximation of the natural logarithm of 2, which is the exact calculation behind doubling time at compound interest. 72 was chosen because it's easy to divide by many common numbers (2, 3, 4, 6, 8, 9, 12...), making it very practical for quick mental math.
When is it more accurate, and when does it fail?
The rule of 72 gives fairly close results for interest rates between 6% and 10% annual, which happens to be the typical range for long-term index fund portfolios. Outside that range (very low rates, like 1-2% on a savings account, or very high rates, like credit card interest) the margin of error grows, and it's better to use the exact compound interest calculation instead of this approximation.
What it's useful for in practice
- Mentally comparing two products with different interest rates, without opening a calculator.
- Getting a quick sense of whether a savings goal is realistic in the time you have available.
- Building an intuitive understanding of why small differences in interest rate matter so much long-term.
For an exact calculation, with your capital, your monthly contributions, and the actual expected rate, the best option is to use a full compound interest calculator instead of this mental rule.