Asked by: Dr. Jarred Rath Jr.  |  Last update: February 15, 2025
 

How the Rule of 72 Works. For example, the Rule of 72 states that $1 invested at an annual fixed interest rate of 10% would take 7.2 years ((72 ÷ 10) = 7.2) to grow to $2. In reality, a 10% investment will take 7.3 years to double (1.10^7.3 = 2). The Rule of 72 is reasonably accurate for low rates of return.

What is the 7 year compounding rule?

Using the Rule of 72, you can realize the power of compounding interest and better plan for future financial goals. If $5,000 was invested with an annual growth rate of 10%, the original investment would double to $10,000 in 7.2 years. After 7.2 years $10,000 doubles to $20,000.

How long would it take for you to double your money from $9000 to $20,000 if you will earn 12% interest?

The rule is this: 72 divided by the interest rate number equals the number of years for the investment to double in size. For example, if the interest rate is 12%, you would divide 72 by 12 to get 6. This means that the investment will take about 6 years to double with a 12% fixed annual interest rate.