- What is the Rule of 72?
- The Rule of 72 is a mental-math shortcut for how long it takes an investment to double at a fixed annual rate: divide 72 by the interest rate. At 6%, that's 72 ÷ 6 = 12.0 years — close to the exact answer of 11.9 years from the compound interest formula.
- How accurate is it?
- It's a close approximation for rates roughly between 3% and 15%, and it's usually within a few weeks to a few months of the exact figure in that range. It drifts further from exact at very low or very high rates — the table above compares the Rule of 72 estimate against the exact math at each rate so you can see the gap directly.
- Why 72 and not some other number?
- 72 is chosen because it divides evenly by a lot of common small numbers (2, 3, 4, 6, 8, 9, 12), which makes the mental math easy, and it happens to sit close to the mathematically exact constant of about 69.3 (100 × ln 2) for continuously compounded growth. Some references use the Rule of 70 or Rule of 69.3 instead, which trade a bit of easy divisibility for slightly better accuracy at low rates.
- Does compounding frequency change the doubling time?
- Yes, slightly — more frequent compounding reaches double a little sooner for the same stated annual rate, since interest starts earning interest sooner. The table above shows both annual and monthly compounding; the gap between them is small but grows a bit as the rate increases.
- Does the Rule of 72 work for debt too?
- Yes — the same math applies to anything growing at a fixed compounding rate, including how long an unpaid credit card balance takes to double. A 24% APR balance left untouched would roughly double in 72 ÷ 24 = 3 years.