Rule of 72 Explained: A Simple Math Trick That Makes You a Money Genius

Even if you hated math as a student, you’ll love learning the Rule of 72; it takes less than a minute to learn. The Rule of 72 explained simply is an easy, yet powerful mental shortcut to quickly estimate how long it takes for money (or debt) to double.

For example, if someone asked you how long it would take for their mutual fund to double in value if it's compounding at 10%, you'll be able to tell them within seconds without the use of a calculator.

The Rule of 72 is my favorite accounting shortcut—actually, I don’t know any other accounting shortcuts, but it would still be my favorite. And I'm sure it will be yours too. You'll feel like a math genius whenever you use it.

Don’t worry. This is grade school-level math. All you need to know is how to divide using the number 72, which is how the Rule of 72 got its name.

USE THE RULE OF 72 TO CALCULATE HOW LONG FOR MONEY TO DOUBLE BASED ON A GROWTH RATE

If you know the compounded annual growth rate of an investment, you can easily calculate approximately how many years it would take for that investment to double in value by dividing 72 by the growth rate.

Example 1: At a 9% compounded annual growth rate, I know it will take approximately eight years for my investment to double in value because 72 divided by 9 is 8.

In actuality, $1,000 compounding 9% for eight years comes to $1993, which is off by less than half a percent.

Example 2: At a 24% compounded annual growth rate, my investment will double in value in about three years because 72 divided by 24 is 3.

In three years, a $1,000 investment would actually turn into $1,907. The variance is a little greater than the last example, but still very close.

USE THE RULE OF 72 TO CALCULATE THE GROWTH RATE NEEDED TO DOUBLE MONEY IN "X" NUMBER OF YEARS

The previous examples showed how to use the Rule of 72 to estimate how long it would take to double money based on a fixed compound annual growth rate. But the shortcut can also be used to estimate the compound annual growth rate needed to double money within a fixed number of years.

It’s the same calculations. Previously, you divided 72 by the growth rate to get the number of years to double. This time, you’ll simply divide 72 by the number of years to get the growth rate.

Example: If you want to double your money every four years, what annual growth rate would you need? Dividing 72 by 4 is 18. So that tells you that you’ll need to average about 18% compounded annual growth to double your money in four years.

In actuality, 18% compounding annually for four years will turn $1,000 into $1,939.

Note: When using the Rule of 72, dividing 72 by a number between 7 and 10 will give the most accurate estimates. The further the number you use is from this sweet spot, the less accurate the estimate will be, but you'll still be in the ballpark.

THE BOTTOM LINE ON THE RULE OF 72

So the next time you’re looking at prices or wondering how long your investments might take to grow, remember the Rule of 72.

It’s a simple shortcut that turns complicated math into an easy mental trick. Whether it’s inflation, investing, or even the price of crabs, this little rule shows us that doubling isn’t magic—it’s just time and compounding working together.

Leave a comment below if you like the Rule of 72 trick.

See you at the finish line!

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Disclaimer: I’m not a licensed financial professional. This blog shares my personal experiences and opinions around money, investing, and early retirement. It’s for informational and educational purposes only—not financial, legal, or tax advice. Always do your own research or consult with a qualified professional before making any financial decisions.