The Rule of 72 — a Shortcut That Makes Anyone Look Like a Math Genius

This is one of the most useful math tricks I know. It’s called “The Rule of 72,” and I use it at least a few times every week.

Let’s start with some examples of what we can do with it.

• If you asked me how many years it would take for an investment account to double if it pays 6% per year, I could tell you in a heartbeat that it will take 12 years to double.
• Or if you told me that you are hoping to double an investment in 8 years, my reply would be that you should be planning for it to grow by at least 9% per year.

Are you seeing the pattern? Let’s do one more.

• If you bragged to me that you sold your house last year (2021) and that it had doubled in price since you bought it 24 years ago in 1997, I might ask you if a 3% per year gain really is bragworthy….

What do these pairs of numbers — 6, 12 and 8, 9 and 3, 24 — have in common?

When you multiply each pair together, you get 72. That’s it. That’s the secret.

Specifically, if you multiply (1) an interest/growth rate (as a percentage) times (2) a number of years (or periods) and the answer is 72, then you have a growth rate that will double over the given period of time.

That’s the Rule of 72.

This is a pretty simple math trick. It doesn’t give precisely accurate numbers, but for most pairs of numbers, it will be…