What is Rule of 72?
The Rule of 72 is a way to estimate the number of years it will take to double your money. It’s called the “rule” because that’s exactly what it is: an approximation, not an exact science.
The rule is based on one simple principle: The time it takes for money to double depends on your interest rate and the frequency with which you’re making deposits or withdrawals.
What is a Rule of 72 Calculator?
A Rule of 72 calculator is a simple online tool that can be used to calculate the time required to double your money at a given interest rate.
The rule of 72 was popularized by Albert Einstein, who questioned the value of compound interest and wanted to find out how long it would take for someone to double their money.
The rule says that in order to figure out how many years it will take for your money to double at an interest rate, you just divide the number 72 into the resulting percentage increase (e.g., if you want to know how many years it will take for you to double your money if you’re getting 3% interest per year).
How to Calculate Rule of 72?
If you’re looking for a way to calculate the Rule of 72, here’s how:
Using our calculator, enter any number into the “increase” field. The result will be the approximate number of years required to double your money using that annual yield.
How Does this Rule of 72 Calculator Work?
This calculator lets you calculate how long it will take for your money to double at a given interest rate. To use the calculator, you’ll need to enter the annual interest rate.
You can use this rule of thumb to determine how much money will double in a certain period of time: if an investment yields 4% per year then it will take about 18 years for it to double in value (72 divided by 4).
Example of Rule of 72 Calculator
The Rule of 72 is a useful tool that can help you determine how long it will take for your investment to double. To calculate the time it will take, simply divide 72 by the interest rate of your investment.
For example: If you have a savings account with an annual percentage yield (APY) of 1.5%, then dividing 72 by 1.5% will give you about 46.55 years for your money in the bank to double.*
If instead, you had invested in stocks and received an average annual return of 12%, then dividing 72 by 12% would give you 6 years for those investments to double!
What is the 4% retirement rule?
The 4% retirement rule is a rule of thumb for safe withdrawal rate. The idea behind the 4% retirement rule is that you can take out 4% of your total savings at the start of your retirement and then adjust for inflation each year.
The problem is that if you don’t use an inflation-adjusted portfolio, or if your portfolio doesn’t have enough growth potential, this could lead to running out of money in as little as 10 years. It’s important to note: There are many ways to withdraw from your savings without running out before your time comes.
For example, instead of withdrawing $40k from a $1 million portfolio every year (which would be a 4 percent drawdown), consider taking out only $20k (a 2% drawdown). That way if you live until 95 and need another 15 years worth of cash flow before dying—you still have some left over!
Conclusion
If you are wondering how to double your money in 7 years, then the Rule of 72 is the perfect tool. The rule states that if you have $100 and invest at a 10% rate of return, then after 7 years it will be worth $200. If you want to see what happens if you invest at different rates, try out our calculator!
FAQs
What is the Rule 72 when should it be used?
The Rule of 72 is an easy way to calculate how long it will take for your money to double at a certain interest rate. The Rule is useful for determining how long it will take for investments like bonds and CDs to grow into larger sums of cash.
Why does the Rule of 72 work?
It uses the fact that the time it takes for an investment to double is roughly the same as the number 72 divided by the interest rate, so if you have an interest rate of 0.5%, then it will take 36 years for your money to double.
What is the 7 year rule for investing?
The 7-year rule is a rule of thumb that is used to calculate the time it takes to double an investment. It assumes that you can earn an average annual return of 7%.
Can I double my money in 5 years?
If you’re looking to double your money in 5 years, the answer is yes.
Do stocks double every 7 years?
Many people believe that “stocks double every 7 years.” This is not true. However, there is a good rule of thumb that can be used to estimate the doubling time for long-term investments.
