Skip to main content

Rule of 72 (72er-Regel)

Level 1 · Basics⚙ Method
German term72er-Regel
Read firstCompound interest

The Rule of 72 estimates how long it takes a sum to double: divide 72 by the annual growth rate in percent. At 6% annual growth, 72 / 6 = 12 years to double. It is a mental-math shortcut for compound interest, most accurate for rates between roughly 4% and 12%.

Why it matters​

The Rule of 72 turns an abstract percentage into a concrete number of years — useful for a fast sense-check whenever someone quotes a growth rate. A savings account, a fund's historical return, or a "guaranteed" investment scheme all become easier to evaluate once the rate converts into "doubles in X years."

The same shortcut works in reverse for erosion. Inflation shrinks purchasing power the same way compound interest grows a balance, so 72 / inflation rate gives the number of years until money buys half of what it does today. Revolving debt follows the identical math: an unpaid balance compounding at a high annual rate doubles on the same schedule.

The method​

  1. Take the annual rate in percent. Use the number as stated — an interest rate, an inflation rate, or a debt's annual percentage rate (APR) — without converting to a decimal.
  2. Divide 72 by that number. The result is the approximate number of years for the underlying amount to double (or, for inflation, to lose half its value).
  3. Run it in reverse when needed. Given a target doubling time in years, 72 / years gives the annual rate required to hit it.
  4. Treat the result as an approximation. The Rule of 72 is a rounding shortcut for the underlying compound-growth formula, not an exact calculation. It tracks closest in the 4-12% range; outside that band, the estimate drifts further from the precise answer, though it stays useful for a quick check.

Worked examples​

  • Savings growing at 6%: 72 / 6 = 12 — a balance roughly doubles in 12 years (illustrative rate).
  • Inflation at 2%: 72 / 2 = 36 — purchasing power roughly halves in 36 years at that rate (illustrative rate).
  • Revolving credit at 18%: 72 / 18 = 4 — an unpaid balance roughly doubles in 4 years if left to compound at that rate (illustrative rate).

All rates above are illustrative examples of the method, not current product terms or forecasts.

Check yourself​

A savings balance grows at 9% per year (illustrative rate). Using the Rule of 72, approximately how many years until it doubles?

A goal is to double a sum in 6 years. Using the Rule of 72, approximately what annual growth rate (in percent) would be required?

Inflation runs at 4% per year (illustrative rate). Using the Rule of 72, in approximately how many years does purchasing power halve?

Which statement about the Rule of 72 is correct?