Want to know a financial trick that Warren Buffett uses in his head? The Rule of 72 is the simplest way to estimate how long it takes for your money to double. No calculator needed—just basic division that anyone can do.
The Rule of 72 is a quick mental math formula that estimates how many years it takes for an investment to double in value. Here's the magic formula:
That's it! Just divide 72 by your annual return rate.
72 ÷ 7 = 10.3 years
$10,000 becomes $20,000 in about 10 years
72 ÷ 10 = 7.2 years
$10,000 becomes $20,000 in about 7 years
72 ÷ 3 = 24 years
Your savings double in 24 years—ouch!
72 ÷ 12 = 6 years
High risk, but money doubles every 6 years
The Rule of 72 reveals the shocking power of compound interest. Look at these eye-opening scenarios:
Imagine you invest $1,000 in a diversified portfolio earning 8% annually:
That single $1,000 investment becomes $16,000 without adding another penny!
The Rule of 72 is incredibly accurate for returns between 6-10%, but it has limitations:
Credit card debt at 18% interest? Your debt doubles every 4 years (72 ÷ 18 = 4). This is why minimum payments are a trap!
If inflation runs at 4%, your money's purchasing power halves every 18 years. Your investments need to beat this just to stay even.
The Rule of 72 is a fantastic estimation tool, but when you're planning your financial future, you need exact numbers. Want to see precisely when your money will double with monthly contributions, inflation adjustments, and goal planning?
The Rule of 72 isn't just a math trick—it's a window into the incredible power of compound interest. Once you understand how quickly money can double with the right returns and time, you'll never look at investing the same way again.