Glossary
Rule of 72
Definition
The rule of 72 estimates how many years it takes money to double: 72 divided by the annual rate. At 8%, about 9 years. It's most accurate near 8% and works for inflation and debt too.
How Rule of 72 works
The exact doubling time is ln 2 ÷ ln(1 + rate).
It's a simple way to show the power of compounding.
Why it matters to a firm
It's memorable and makes compounding intuitive for clients.
Calculators that use Rule of 72
Questions about Rule of 72
How accurate is it?
Close between about 6% and 10%.
Can it apply to inflation?
Yes.
What's the exact formula?
ln 2 ÷ ln(1 + rate).
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Related terms: Compound interest
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