MEPX
Chapter 3 of 10All chapters
  1. 1Simple against compound
  2. 2The arithmetic
  3. 3The rule of 72
  4. 4Why starting early wins
  5. 5Compounding against you
  6. 6Compounding frequency
  7. 7Real against nominal
  8. 8Fees compound too
  9. 9Regular contributions
  10. 10Exponential thinking

Chapter 3 of 10

The rule of 72

Doubling time in your head.

How to use it

Divide 72 by the annual percentage rate to get the years to double. At 6 percent that is 12 years; at 9 percent, 8 years; at 2 percent, 36 years.

  • It is accurate to within a few percent for rates between about 4 and 15.
  • It works for inflation too: at 3 percent, prices double in 24 years.

Why it is useful

It turns an abstract rate into a concrete timescale. The difference between 4 and 8 percent stops being a small gap and becomes half the waiting time.