The rule of 72 dictates that to be able to compute the approximate number of years for your money to double, simply divide 72 by the interest rate.
72 / interest rate = approximate no. of years it will take for your money to double.
Let’s take the example of having a Savings Account in any commercial bank with the current prevailing interest rate of 1%.
Say I put a 100k in Metrobank under savings account which gives 1% pa interest. How many years will it take for my money to become 200k? Using the rule of 72, we use
72 / 1% = 72 years for my money to double
So if I’m 29 years old, by the time I reach 101 years old, my money will become approximately P200,000.00. By that time, most likely, I’ll be 6 feet under.
Likewise, if I’ll invest the same money in a mutual fund that gives an average return of 12%, my money will double when I’m 35 years old or in a period of 6 years.
| Rate of Return | Rule of 72 | Actual # of Years | Difference (#) of Years |
| 2% | 36.0 | 35 | 1.0 |
| 3% | 24.0 | 23.45 | 0.6 |
| 5% | 14.4 | 14.21 | 0.2 |
| 7% | 10.3 | 10.24 | 0.0 |
| 9% | 8.0 | 8.04 | 0.0 |
| 12% | 6.0 | 6.12 | 0.1 |
| 25% | 2.9 | 3.11 | 0.2 |
| 50% | 1.4 | 1.71 | 0.3 |
| 72% | 1.0 | 1.28 | 0.3 |
| 100% | 0.7 | 1 | 0.3 |
Interesting, isn’t it? The power of time and money.