All Financial Wisdom

The Rule of 72

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The rule of 72 is meant to be an easy calculation for you to do on the spot or on the back of an envelope.  This rule is used to estimate how long it takes an investment to double in value when given a fixed interest rate.

To use the rule of 72, you divide 72 by the annual interest rate.Ruleof72

Note: this isn’t 100% accurate, especially for the lower interest rates, but the higher interest rates, the more accurate this becomes.

The rule of 72 can be used for real estate investing, saving, or investing.  Once you understand how much the interest rate is, you can estimate how long until you get 100% of your principal payment back.

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