The Rule of 72 is a formula that lets you know how long it will take for your savings to double in value. This calculation assumes that the interest rate remains the same over time.
Here is how you calculate it:
- Divide 72 by the current interest rate to determine the number of years that it will take to double your initial savings amount.
- 72 divided by interest rate = number of years needed for the amount to double.
- For example, if you invest $50 in a savings account at a 4 percent interest rate, it will take 18 years for your initial savings of $50 to double.
- 72 divided by 4 percent or .04 = 18
You can also find out how much compound interest you need to have when you know how many years you want your initial savings amount to double.
Here is an example of how this works.
- If you put $500 in an account that you want to double in 12 years, you will need an interest rate of 6 percent.
- 72 divided by 12 = 6 percent.
