What is the rule of 72?

[genchan]

I keep reading about the rule of 72. What is this?

[DivaJen]

Here's a link that helps explain it: Rule of 72

The "Rule of 72" is a rule of thumb that can help you compute when your money will double at a given interest rate. It's called the rule of 72 because at 10%, money will double every 7.2 years.

To use this simple rule, you just divide the annual interest into 72. For example, if you get 6% on an investment and that rate stays constant, your money will double in 72 / 6 = 12 years. Of course you can also compute an interest rate if you are told that your money will double in so-and-so many years. For example, if your money has to double in two years so that you can buy your significant other that Mazda Miata, you'll need 72 / 2 = 36% rate of return on your stash.

[terry1156]

Couldn't have said it better myself. You do hear about this rule for interest quite a bit on investing boards.