The Rule of 72

Why you need a shortcut

With compound growth, you earn growth on your past growth, so money grows by a percentage of an ever-bigger amount: × 1.06, then × 1.06 again, year after year. Working out exactly when that doubles takes logarithms, which nobody does in their head.

The Rule of 72 skips the hard part: 72 ÷ rate ≈ years to double.

Trying it out

• At 6% a year: 72 ÷ 6 = 12, so about 12 years to double (exact, with yearly compounding: 11.9).
• At 8%: 72 ÷ 8 = 9, about 9 years (exact: 9.0).
• At 2%: 72 ÷ 2 = 36, about 36 years (exact: 35.0).

It works backwards too: if you want to double in 10 years, you'd need roughly 72 ÷ 10 = 7.2% a year. The estimate is closest for rates around 6 to 10% and drifts a little at very low or very high rates.

The scary side: debt

Compounding doesn't care whose money it is. A credit card balance at 24% a year doubles in about 72 ÷ 24 = 3 years if you never pay it down and add no new charges. Card interest is usually charged monthly or daily, and fees can add more, so a real unpaid balance can double a little faster. (In practice, cards require at least a minimum payment each month.)

Inflation doubles prices too

At 3% inflation, prices double in about 72 ÷ 3 = 24 years (exact: 23.4). A cart of groceries that costs $100 today would cost about $200. So money that just sits still loses half its buying power over that time, and your savings have to grow at least as fast as inflation just to stand still.

Try it yourself

Find the interest rate on a savings account you have (or one advertised online) and divide 72 by it. How many years would it take to double? Then do the same with a credit card's APR from a statement or a card offer, and compare the two numbers.

Good to know

• The Rule of 72 is an approximation for compound growth; exact doubling times with yearly compounding are 6% = 11.9 years, 8% = 9.0, 2% = 35.0, 3% = 23.4, 24% = 3.2.
• It is most accurate around 6 to 10% and drifts at very low or very high rates.
• The credit card example assumes no payments and no new charges. Cards compound monthly or daily and add fees, so real balances can double a bit faster; minimum payments are required in practice.
• The rates are examples, not expected returns or forecasts.
• The math is the same in Canada.
• Educational only, not financial advice.

Why it matters for you

One quick division tells you how powerful a rate really is. A few percentage points of difference turns into years of difference in doubling time, whether it's your savings growing or a debt growing against you. Next, we'll sort the things you own into the ones that put money in your pocket and the ones that take it out.