The Rule of 72, Explained

What the rule says

Divide 72 by the annual growth rate and you get the approximate number of years for a sum to double. At 6% a year, that is 72 ÷ 6 = 12 years; at 9% it is 8 years; at 4% it is 18. It is a mental-maths shortcut, not an exact formula, but it is close enough to compare options at a glance without a calculator.

Why it works

The exact doubling time under compound interest is ln(2) ÷ ln(1 + rate), and ln(2) is about 0.693. For small rates this simplifies to roughly 69.3 ÷ rate (in percent). The rule bumps that up to 72 because 72 divides cleanly by so many common rates, trading a sliver of accuracy for arithmetic you can do in your head.

When it's accurate

The rule is sharpest for rates roughly between 6% and 10%, where the small approximation error nearly cancels out. At lower rates, using 69 or 70 is a touch closer to the truth; at very high rates, 72 slightly overstates the time. For everyday savings and investment rates, though, it is well within useful range.

Using it both ways

The rule flips neatly. If you know the rate, 72 ÷ rate gives the doubling time; if you know the time you want, 72 ÷ years gives the rate you need — to double in 8 years you need about 9% a year. The same idea works against you too: at 3% inflation, prices double in roughly 24 years, and a debt left to compound doubles on the same schedule.

Frequently asked questions

How accurate is the rule of 72?

Very close for rates around 6–10%; it drifts a little at very low or very high rates.

Does it work for inflation too?

Yes. Divide 72 by the inflation rate to estimate how long until prices double — at 3%, about 24 years.

Why 72 and not 70?

72 divides evenly by many common rates (2, 3, 4, 6, 8, 9, 12), which makes the mental arithmetic easy.