The “rule of 72" is a method of estimating how long it will take compounding interest to double an investment.
Why is it important?
Beside the “rule of 72” providing you a quick way determine the growth of your investment, it also opens up your mind to the important relationship between time and rate.
How it works:
For example, using the “rule of 72” an investor who invests $1,000 at an interest rate of 4% per year, will double their money in approximately 18 years.
At 6% interest, your money takes 72/6 or 12 years to double.
At 8% interest, your money takes 72/8 or 9 years to double.
At 12% interest, your money takes 72/12 or 6 years to double.
The Power of Compound Interest
Day 1: $.01
Day 2: $.02
Day 3: $.04
Day 4: $.08
Day 5: $.16
Day 6: $.32
Day 7: $.64
Day 8: $1.28
Day 9: $2.56
Day 10: $5.12
Day 11: $10.24
Day 12: $20.48
Day 13: $40.96
Day 14: $81.92
Day 15: $163.84
Day 16: $327.68
Day 17: $655.36
Day 18: $1,310.72
Day 19: $2,621.44
Day 20: $5,242.88
Day 21: $10,485.76
Day 22: $20,971.52
Day 23: $41,943.04
Day 24: $83,886.08
Day 25: $167,772.16
Day 26: $335,544.32
Day 27: $671,088.64
Day 28: $1,342,177.28
Day 29: $2,684,354.56
Day 30: $5,368,709.12
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