What is the Rule of 72?

The Rule of 72 is a mathematical shortcut used to estimate the number of years required for an investment to double at a fixed annual compound rate of return. You simply divide the number 72 by the expected annual interest rate. For example, at an 8% annual return, $10,000 will double to $20,000 in 9 years (72 ÷ 8 = 9). Conversely, at a 3% inflation rate, the purchasing power of your cash is halved in 24 years (72 ÷ 3 = 24).