The Rule of 72

Ever wondered how long it takes your money to double? Turns out you don’t need a fancy calculator. There’s a simple trick called the Rule of 72 that makes it easy to estimate growth and fast. When I first started as an advisor, I remember those long drives and sitting down at a client’s kitchen table. Surrounded by children’s toys, unique knickknacks accumulated over the years, and eager smiles, you can’t help but feel a part of their journey and invested to do everything to help.

Where to start? I would pull out a napkin, and write down this formula. It’s such a simple way to psychologically think about money and rates of return differently. With all the complicated formulas and data in the world today, the biggest determinants of life are often quite simple.

The Rule of 72 is a quick math formula to figure out how many years it will take for an investment to double, based on the interest rate or return you’re getting.

The Simple Formula:
72 ÷ interest rate = years to double

See? Notice how this trick works both ways – on your savings and on your debt.

Please keep in mind that the Rule of 72 is just an approximation. It usually works best with
returns between 6-10%. Real life is going to be messier – returns vary, taxes and fees apply.

Still, it’s one of the simplest ways to make growth feel real. Even modest returns add up over
time thanks to compounding! It also makes you understand just how important it is to pay off
debt, Ramsey-style. That “small” credit card balance can snowball much faster than most people
think.

The Rule of 72 is like a financial “back-of-the-napkin” trick. It doesn’t replace planning, but it
can open your eyes to the power (and risk) of compounding. Next time you’re weighing out a
savings option or staring at a credit card balance, just run the Rule of 72, you might look at your
money in a whole new way.

As I like to say, there are a few enemies to your growth: inflation, taxation, and low rates of
return. As your financial advisors, we are here to help cut through the complications.