Many times as a retirement income planner I am asked “How long will it take to double my money”? I find using the rule of 72 is a simple way to figure out the number of years it takes to double your money at an annual rate of return. You divide the rate, as a percentage into 72. So as an example: an investment with a 6 percent compound annual rate of return will take 12 years to double in value.
72 divided by 6 (rate of return) = 12 (number of years it will take to double an investment)
Financial planners like this formula because it’s easy to understand and it shows the value of saving even with modest or a reasonable rate of return on your investment. You can also use the rule of 72 for expenses like inflation or interest: If inflation rates go from 2% to 3%, your money will lose half its value in 24 years instead of 36. The rule of 72 is just math, but it's an extremely helpful rule of thumb to put the marathon of investing into perspective. Think through what you use your savings for, and make sure you use them in a way that allows your money to reach its full potential.
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