The Rule of 72 Explained

The Rule of 72 is a simple mental shortcut: divide 72 by your annual interest rate to estimate how many years it takes to double your money.

The formula

At 8%: 72 ÷ 8 = 9 years. At 6%: 72 ÷ 6 = 12 years. At 12%: 72 ÷ 12 = 6 years.

Why 72?

The exact formula for doubling time is ln(2) / ln(1 + r) ≈ 0.693 / r. For interest rates between 6% and 10%, 72 gives a better approximation than 69.3 because it has more divisors (making mental division easier). At rates below 6% or above 10%, 70 or 69.3 are slightly more accurate.

Practical applications

• Investments: At the historical ASX average of ~10%, your portfolio doubles every 7.2 years
• Inflation: At 3% inflation, purchasing power halves in 24 years
• Debt: At 18% credit card interest, an unpaid balance doubles in 4 years
• GDP: An economy growing at 3.5% doubles in size every 20 years

Rule of 72 for debt

The rule works in reverse for debt. At 20% interest, an unpaid credit card balance doubles in 72 ÷ 20 = 3.6 years. A $5,000 debt becomes $10,000 in under 4 years if only minimum payments are made.

Accuracy

For rates between 6–10% — the most common investment return range — the Rule of 72 is accurate to within 1%.

Related: What is compound interest? · Superannuation guide