Lesson 1 of 7 · 2 min · Compounding

The rule of 72

One division tells you how fast money doubles.

Pencil drawing of a large number 72 on a green wash, with a small arrow curving upward.
Open the drawn lesson

  1. Divide 72 by the yearly return. The answer is roughly how many years it takes for your money to double.

  2. At 8% a year, $1,000 turns into $2,000 in about 9 years. Then $4,000. Then $8,000.

  3. Each doubling is bigger than all the ones before it combined. The last years of a long run do most of the work, which is why starting early matters so much.

  4. It works against you too. Credit card debt at 24% doubles in about 3 years.

  5. It also works on prices. At 3% inflation, prices double in about 24 years. Savings that earn less than that quietly shrink.

Quick question

Your fund returns 6% a year. Roughly how long until your money doubles?

  • 6 years
  • 12 years
  • 20 years
Show the answer

12 years

72 ÷ 6 = 12. The exact answer is 11.9 years, close enough to plan with.

Keep this one

Years to double = 72 ÷ the rate.

Where this comes from

Luca Pacioli wrote the rule down in 1494, in his Summa de arithmetica. It is an approximation that works best for returns between about 4% and 12%.