- What is the Rule of 72?
- The Rule of 72 is a mental math shortcut: divide 72 by your annual return rate to estimate how many years it takes for an investment to double. At 6%, money doubles in approximately 12 years. At 9%, it doubles in approximately 8 years.
- How accurate is the Rule of 72?
- It is most accurate for rates between 6–10%. The exact doubling time is ln(2) / ln(1 + r). At 6%, the rule gives 12.0 years; the exact answer is 11.9 years. At 12%, the rule gives 6.0 years; the exact answer is 6.1 years. Close enough for quick mental calculations.
- Can I use it for debt?
- Yes. The Rule of 72 works for debt as well. A credit card at 24% APR doubles what you owe in about 3 years if you make no payments. It is a useful way to illustrate the cost of high-interest debt.
- Is there a Rule of 70 or Rule of 69?
- Rule of 70 is used for continuous compounding and is slightly more accurate for lower rates. Rule of 69 (or 69.3) is the mathematically precise version for continuous compounding since ln(2) ≈ 0.693. Rule of 72 became standard because 72 has many divisors (2, 3, 4, 6, 8, 9, 12), making mental math easier.
