The Rule of 72: The Fastest Way to Understand Compound Interest

Here’s a question most people can’t answer without a calculator: if your investments earn 8% per year, how long until your money doubles?

The answer is roughly 9 years. And you can work that out in your head, in seconds, using a trick that’s been around since the 15th century. It’s called the Rule of 72 — and once you know it, you’ll never think about investing the same way again.

What Is the Rule of 72?

The Rule of 72 is a simple mental math shortcut for estimating how long it takes an investment to double in value at a given annual rate of return.

The formula couldn’t be simpler:

That’s it. No spreadsheet, no calculator, no financial degree required.

Rule of 72 Examples

Let’s run through some real numbers so you can feel how this works:

That last line is worth pausing on. A typical savings account paying 0.5% takes 144 years to double your money. You’ll be long gone. This is why parking money in a savings account feels safe but is, in real terms, a slow leak — inflation compounds in the opposite direction at roughly the same speed.

The Rule of 72 in Action

Say you’re 30 years old and you invest $50,000. You plan to leave it untouched until you’re 66 — a 36-year runway. Your investment earns the long-run historical stock market return of around 8%.

Using the Rule of 72: at 8%, your money doubles every 9 years.

• Age 30: $50,000
• Age 39: $100,000 (1st double)
• Age 48: $200,000 (2nd double)
• Age 57: $400,000 (3rd double)
• Age 66: $800,000 (4th double)

That $50,000 becomes $800,000 without adding a single dollar more. Four doublings, 36 years, 8% annual return. No calculator needed — just divide 72 by 8 to get 9-year doubling periods, then count the doublings.

Why the Number 72?

The mathematically precise version of this rule uses the natural logarithm: the exact doubling time is ln(2) ÷ r, where r is the decimal rate of return. Since ln(2) equals approximately 0.693, you’d use 69.3 as the numerator for perfect accuracy.

So why 72? Two reasons. First, 72 is close enough to 69.3 that the error is tiny — usually less than 1% for returns between 6% and 10%. Second, and more practically, 72 has more divisors than 69 or 70. It divides cleanly by 1, 2, 3, 4, 6, 8, 9, 12, 18, 24, and 36 — which covers almost every realistic investment return you’d encounter. The slight mathematical imprecision is worth the mental arithmetic convenience.

For very high returns (above 20%), the Rule of 72 starts to overestimate doubling time slightly. For those scenarios, the Rule of 70 is more accurate. But for realistic long-term investment returns of 5–12%, the Rule of 72 is your most useful tool.

The Flip Side: The Cost of Waiting

The Rule of 72 is just as powerful when you run it backwards — to understand the cost of delaying investing.

Say you’re 25 and you have $20,000. You’re debating whether to invest it now or wait five years until you “feel more financially stable.”

At 8% returns, your money doubles every 9 years. From age 25 to 67 is 42 years — roughly 4.7 doublings, meaning that $20,000 becomes around $355,000.

Wait until 30 to invest the same $20,000. Now you have 37 years — roughly 4.1 doublings. The same $20,000 becomes around $250,000.

Those five years of hesitation cost you $105,000 in final portfolio value. The money didn’t change. Only the time did.

This is why the FIRE community emphasises starting early with almost obsessive energy. Compound interest doesn’t care how smart you are, how high your salary is, or how good your stock picks are. It rewards time above everything else.

Using the Rule of 72 for Inflation

The Rule of 72 works in reverse too — and understanding inflation’s compounding effect is just as important as understanding investment growth.

At 3% inflation, prices double in 24 years (72 ÷ 3 = 24). That means something that costs $50,000 today will cost $100,000 in 24 years. Something that costs $1,000,000 today will cost $2,000,000.

This is why your retirement number needs to account for inflation, not just growth. If you’re planning a retirement that’s 30 years away, your cost of living will roughly double by the time you get there.

Using the Rule of 72 for Debt

The same rule applies to high-interest debt — except compounding works violently against you.

Credit card debt at 24% interest doubles in just 3 years (72 ÷ 24 = 3). That means a $5,000 credit card balance you ignore for 3 years becomes $10,000. Ignore it for 6 years and it’s $20,000 — quadrupled, with you paying for it.

At 18% interest (a common card rate), debt doubles every 4 years. At 12%, every 6 years.

This is why high-interest debt is the single most important financial problem to solve before aggressive investing. The compounding working against you on 18–24% debt almost always outpaces what compounding can do for you in the market.

The rule of thumb: if your debt interest rate is higher than your expected investment return (usually around 7–8% for a diversified portfolio), pay the debt first. The math demands it.

The Rule of 72 and Coast FIRE

For Coast FIRE planning, the Rule of 72 is a back-of-envelope sanity check for any projection.

Say you’ve accumulated $150,000 and want to know if it’ll reach $1,200,000 in 30 years at 8%. That’s 8x growth. Using the Rule of 72 (doubling every 9 years): one double = $300,000 at year 9, two doubles = $600,000 at year 18, three doubles = $1,200,000 at year 27. Close enough — three doublings in 27 years, and you have 30 years, so yes, you’ll get there with room to spare.

The Rule of 72 won’t give you a precise answer, but it’ll tell you within minutes whether your plan is plausible before you open a spreadsheet.

What the Rule of 72 Really Teaches You

Beyond the arithmetic, the Rule of 72 teaches a lesson that most people never fully internalise: time is the most valuable input in investing, not money.

A 25-year-old with $10,000 and 40 years of runway will almost certainly end up with more money than a 45-year-old with $100,000 and 20 years of runway — even though the 45-year-old invested ten times as much.

At 8% returns:

• $10,000 × 40 years = roughly $217,000 (about 4.4 doublings)
• $100,000 × 20 years = roughly $466,000 (about 2.2 doublings)

Okay, in this case the late but larger investment wins — but notice how close it is, even with a 10x capital advantage. Close the gap to $30,000 at age 25 versus $100,000 at 45, and the early investor wins decisively.

The Rule of 72 makes this intuition concrete and fast. Use it constantly — when you’re evaluating a new investment, calculating the cost of procrastination, or checking whether a retirement projection passes a sanity test. It’s the most useful single mental model in personal finance.

Key Takeaways

The Rule of 72 tells you how long it takes to double your money: just divide 72 by your annual return. At the stock market’s historical average of around 8%, your investments double roughly every 9 years. At the typical savings account rate of 0.5%, they double every 144 years. Inflation compounds against you at the same rate it does for you — 3% inflation halves the value of cash every 24 years. High-interest debt compounds faster than almost any investment can grow, making it the most urgent financial problem to solve. And the most important variable of all isn’t your return rate, your stock picks, or your salary — it’s how many years you give your money to grow.

Start early. Let time work. The rest is details.