The Rule of 72 is a simple and practical way to estimate how long it will take for your money to double, based on a fixed annual interest rate or rate of return. It’s a quick mental calculation that doesn’t require complex math, making it a popular tool for understanding the power of compound interest and growth over time.

How to use the Rule of 72:
You take the number 72 and divide it by the annual interest rate (expressed as a percentage). The result gives you an approximate number of years it will take for your invested money to double.

For example:

• If your savings or investment earns 4% annually:
  72 ÷ 4 = 18 years
  So, your money will roughly double in about 18 years.
• If your investment earns 8% annually:
  72 ÷ 8 = 9 years
  Meaning it will double in approximately 9 years.
• For a higher return, say 12%:
  72 ÷ 12 = 6 years

Why is the Rule of 72 useful?
It provides a quick way to visualize the effect of compound interest and helps you set realistic expectations for your savings. Whether you’re saving for a big goal like college, a car, or retirement, understanding how fast your money can grow encourages you to start saving early and choose investments with higher returns when appropriate.

Additional insights:

• The rule works best for interest rates between about 6% and 10%, but it still provides a decent estimate outside this range.
• It also highlights the importance of earning a higher rate of return; even small increases in interest rates can significantly shorten the time it takes for your money to double.
• Remember, this is an estimate; actual growth depends on consistent interest rates and other factors like taxes and fees.

In summary, the Rule of 72 is a simple but powerful tool to help you understand the potential growth of your savings and motivate you to make smart financial decisions early on. It shows that time and interest work together to grow your wealth faster than you might think!