Short answer: Divide 72 by the yearly rate to get the years needed to double. At 8% it takes about 9 years; at 6%, about 12. It works for inflation too: at 6% inflation, prices double in about 12 years.
The rule of 72 lets you estimate compound growth in your head.
Years to double ≈ 72 ÷ yearly rate (%)
How accurate is it?
Very accurate for everyday rates:
- At 4%: the rule says 18 years; the exact answer is 17.7
- At 6%: 12 years; exactly 11.9
- At 8%: 9 years; exactly 9.0
- At 9%: 8 years; exactly 8.0
- At 12%: 6 years; exactly 6.1
It becomes less accurate at very high rates, but for savings, loans and inflation it is close enough to make decisions.
Good to know: The rule assumes interest is compounded and reinvested. If interest is paid out to you, your money does not double this way.
Using it the other way round
Inflation: at 6% inflation, prices double in about 12 years, so money kept in cash loses half its buying power over that time.
Debt: the same maths works against you. A debt at 24% a year, left unpaid, doubles in about 3 years.
Targets: to double your money in 6 years, you need about 72 ÷ 6 = 12% a year.
Questions people ask
Q: Why 72 and not 70?
A: Both are used. 72 is easy to divide by many numbers (2, 3, 4, 6, 8, 9, 12) and is slightly more accurate for typical rates of 6 to 10%.
Q: Does it work for monthly rates?
A: Yes, but the answer is then in months. Convert carefully, and don't mix monthly and yearly rates.