How it works
The rule of 72 is a mental-math shortcut: divide 72 by the annual percentage rate to estimate how many years it takes an investment to double. At 8%, money doubles in about 9 years.
It works because ln(2) ≈ 0.693 and the approximation is tuned for typical rates. It is most accurate between about 6% and 10%; the exact figure is shown alongside for comparison.
It works in reverse too: divide 72 by the years to get the rate needed. It also applies to inflation, showing how quickly prices double.
Formula
Years ≈ 72 ÷ rate; exact years = ln(2) ÷ ln(1 + rate)
Questions people ask
Why 72 and not 70 or 69?
Continuous compounding gives exactly 69.3. Seventy-two is used because it is close for annual compounding at common rates and divides evenly by 2, 3, 4, 6, 8, 9 and 12.
Does the rule of 72 work for debt?
Yes. A credit card balance at 24% with no payments would double in about 3 years.
How accurate is it?
At 8% the rule gives 9.0 years versus an exact 9.006. At very high rates, such as 30%, it becomes less accurate (2.4 vs 2.64 years).