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The "Rule of 72" is a simple mental shortcut used to estimate the number of years required to double your money at a given annual rate of return.

Compounding Shortcut

Estimating doubling time...

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The Magic of 72

To use the Rule of 72, you simply divide 72 by your annual interest rate. The resulting number is the number of years it takes for your investment to double, assuming compound interest.

Why 72?

72 is used because it has many factors (2, 3, 4, 6, 8, 9, 12) making mental math easier. Mathematically, the actual number for continuous compounding is closer to 69.3, but 72 is a remarkably accurate approximation for typical interest rates (5-12%).

Examples:

  • At 4%, money doubles in 72 / 4 = 18 years.
  • At 6%, money doubles in 72 / 6 = 12 years.
  • At 12%, money doubles in 72 / 12 = 6 years.

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