A simple way of determining how long it will take for invested money to double at a particular compound interest rate. Calculated by dividing 72 by a given interest rate. For example if an investment produces a 11% return every year, you would divide 72 by 11, which equals 6.5, thus it would take 6 ½ years for this investment to double.
Additional meaning of Rule of 72:
Is a method for estimating to the number of years it will take for your investment or debt to double in value. To calculate simply divide the number 72 by the percentage rate you are paying on your debt, or earning on your investment to get the number of years it takes to double. Here are two examples… You borrowed $1,000 from your family member, who is charging you 4% interest. 72 divided by 4 is 18. That makes 18 the number of years it would take for your debt to your friend to double to $2,000 if you did not make any payments. You have a savings account with $700 deposited in it. It earns 6% interest from the bank. 72 divided by 6 is 12. It will take 12 years for your savings of $700 to double to $1,400 if you don’t make any withdrawls or deposits.