How Long to Double Your Money? Use the Rule of 72

How the Rule of 72 Works

To use the rule, divide 72 by the investment return (the interest rate your money will earn). The answer will tell you the number of years it will take to double your money.

For example:

  • If your money is in a savings account earning 3% a year, it will take 24 years to double your money (72 / 3 = 24).
  • If your money is in a stock mutual fund that you expect will average 8% a year, it will take you nine years to double your money (72 / 8 = 9).

You can use a Rule of 72 Calculator if you don’t want to do the math yourself.

When to Use the Rule of 72

So now you’re wondering when to use the Rule of 72. There are so many scenarios where this easy formula can help you—from planning for the future and evaluating an investment to understanding the impact of debt. 

To Plan for Financial Goals

Like the example above, you can use the Rule of 72 to determine when you will be able to make a big future purchase, like a house. But, it also can be useful for a lot of other financial goals you have.

If you have financial goals where you want to know how long it will be until you meet them, or you want to know what interest rate you need in order to reach your 5 or 10-year goals, then use the Rule of 72. 

For instance, if you need $100,000 to pay for your kid’s college in 10 years, and you start with $50,000, then you’ll need a 7.2% (72 / 10)  annual rate of return on your investment. 

But, if you start with $15,000, you’ll need your money to double 3 times in the next 10 years. This means you’ll want your money to double every 3.3 years and with a 21.8% (72 / 3.3) annual rate of return on your investment.

If you are investing for retirement, the Rule of 72 can be extremely beneficial. The amount of money you will need for retirement is a big number, but if you start early, even a small amount of money can double over and over again. 

The Rule of 72 will tell you: The less time you have until you retire, the larger the annual rate of return you will need on your investments. ON the other hand – if you have a long time until you plan to retire, you may be able to aim for a smaller annual rate of return. 

To Evaluate Investments

To Evaluate Investments

You can also use the Rule of 72 to evaluate your investments. Of course, this is how I use it most. 

If I’m comparing two potential investments and one will give me an 18% average annual rate of return, and the other is 14%, then I will double my money a year sooner if I go with the investment that could produce an 18% annual rate of return on average. 

If I leave the investment alone for 15 years, the first option will nearly double almost 4 separate times, while the second option will have only doubled 3 times.    

To Better Understand Debt

Just as compound interest works for you when you have money invested, it will also work against you when you have debt. 

Say you have credit card debt with an annual interest rate of 20%. Even if you make the minimum monthly payments on that card and don’t spend anything else, the amount you owe will double in 3 and a half years. Yikes. 

So, if you have debt, the Rule of 72 will hopefully light a fire under you to get rid of it as quickly as possible. 


Is the Rule Useful As You Near Retirement?

The Rule of 72 can be misleading as you near retirement.

Suppose you are 55 with $500,000 and expect your savings to earn about 7% and double over the next 10 years. You plan on having $1 million at age 65. Will you?

Maybe, maybe not. Over the next 10 years, the markets could deliver a higher or a lower return than what averages lead you to expect.

Because your window of time is shorter, you have less ability to account for and correct any fluctuations in the market. By counting on something that may or may not happen, you may save less or neglect other important planning steps like annual tax planning.

The Rule of 72 is a fun math rule and a good teaching tool, but you shouldn't rely on it to calculate your future savings.

Instead, make a list of all the things you can control and the things you can't. Can you control the rate of return you will earn? No. But you can control:

How To Use the Rule of 72 To Estimate Returns

Let’s say you have an investment balance of $100,000, and you want to know how long it will take to get it to $200,000 without adding any more funds. With an estimated annual return of 7%, you’d divide 72 by 7 to see that your investment will double every 10.29 years. 

Here’s an example of other rates of return and how the Rule of 72 affects your investment:

Rate of Return Years it Takes to Double 1% 72 2% 36 3% 24 4% 18 5% 14.4 6% 12 7% 10.3 8% 9 9% 8 10% 7.2 11% 6.5 12% 6

However, the calculation isn’t foolproof. If you have a little more time and want a more accurate result, you can use the following logarithmic formula:

T = ln(2) / ln(1+r)

In this equation, “T” is the time for the investment to double, “ln” is the natural log function, and “r” is the compounded interest rate. 

So, to use this formula for the $100,000 investment mentioned above, with a 6% rate of return, you can determine that your money will double in 11.9 years, which is close to the 12 years you'd get if you simply divided 72 by 6. 

Here's how the logarithmic formula looks in this case: 

T = ln(2) / ln(1+.06)

If you don’t have a scientific calculator on hand, you can usually use the one on your smartphone for advanced functions. However, the basic calculation can give you a good ballpark figure if that’s all you need.

Rule of 72 vs. 70

The Rule of 72 provides reasonably accurate estimates if your expected rate of return is between 6% and 10%. But if you’re looking at lower rates, you may consider using the Rule of 70 instead.

For example, take our previous example of a 2% return. With the simple Rule of 70 calculation, the time to double the investment is 35 years—exactly the same as the result from the logarithmic equation.

However, if you try to use it on a 10% return, the simple formula gives you seven years while the logarithmic function returns roughly 7.3 years, which has a wider discrepancy. 

As with any rule of thumb, the Rules of 72 and 70 aren’t perfect. But they can give you valuable information to help you with your long-term savings plan. Throughout this process, consider working with a financial advisor who can help you tailor an investment strategy to your situation.

How To Double Your Money?

Doubling money requires a lot of calculation and speculation. Having your goals set and a clear vision of how to go about them lays the foundation of wealth creation and if you have a specific number that needs to be attained, you need to select avenues carefully. Doubling money can be done in two ways:

  • Risky way 
  • Safe way

What If I Don’t Have Much Time to Spend on Investing?

Even if you don’t have much time to manage your portfolio, you can keep your investment plan growing all year long by setting up automatic investing. An employer retirement plan is designed to do this for you through payroll deductions. You can also set up recurring transfers to automate your IRA or brokerage accounts.

4. Trade cryptocurrency

The volatility of cryptocurrency – whether it’s Bitcoin, Ethereum or Dogecoin – is an opportunity for speculators to make money trading. Of course, it’s an opportunity to lose money as well, but that’s always part of the trade-off if you’re looking to double your money quickly.

While many cryptos have soared over the last year, they can bounce around significantly, making it tough to hold on when they fall. It can be easy to buy high and sell low and bail out when prices crash, and you’ll end up putting money in someone else’s pocket instead of yours.

It’s easy to lose money on cryptocurrency if you can’t manage your positions, and there are much easier and lower-risk ways to double your money.

2. Invest in an SP 500 index fund

An index fund based on the Standard & Poor’s 500 index is one of the more attractive ways to double your money. While investing in a stock fund is riskier than a bank CD or bonds, it’s less risky than investing in a few individual stocks. Plus, the S&P 500 is composed of about 500 of America’s largest and most profitable firms, so it’s a strong option for long-term investing.

The S&P 500 also has an attractive long-term return, averaging about 10 percent annually over long periods. That means that, on average, you’ll be able to double your money in just over seven years. That said, the return in any single year is likely to be much different – higher or lower – than the average. And the S&P 500 can go through long losing streaks too. For example, the index had a negative return during the 2000s. The S&P 500 made up for it in the 2010s, returning 252 percent – more than tripling.

It’s easy to buy an S&P 500 index fund and you don’t need a lot of expertise to invest this way.

Return Needed to Double

The math rule of 72 tells you how long it will take to double your money at a given rate. The interest rate times the number of years to double compounded equals 72. So to double an investment in 10 years, divide 72 by 10. A mutual fund needs an average annual return of 7.2 percent to double in 10 years.

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