  # The Rule of 72

Whenever you’re dealing with complex numbers, it helps to have a few tricks to make quick calculations easy.  So here’s an easy way to calculate how long an investment will take to double in value using the rule of 72.

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## What do you need to calculate the rule of 72?

To get an exact amount of time for your investment to double, you would need a compound-interest calculator (there are plenty online or Excel will do it).  But to quickly get to a "close enough estimate" all you need is the annual return on your investment.

## An example of the rule of 72

So, let's say you have \$10,000 in your Savings Account and it pays you 10% return after tax per year (spoiler: they don't... not by a long shot).  How long would it take for your \$10,000 to double based on interest alone?

Well, if you withdraw the interest every year, at 10% return, it will take 10 years (obviously).  But through the magic of compound interest, it will take a lot less time.  How much less?  Well, about 2.8 years meaning it takes about 7.2 years to double.

And it turns out that is the magic (approximate) number.

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#### 72 divided by the annual return gives you the approximate number of years it will take to double.

As another example, a return of 9% would take roughly 8 years to double (72 divided by 9 = 8 years).

It's not exact and is just meant as an estimate.  For instance, the true time for a 9% return is 8.04 years but for a quick, back-of-the-napkin calculation 8 years is close enough.

It also gets a little more inaccurate as you approach the extremes.  For instance, an investment with 100% return, takes exactly a year to double, not 0.72 of a year.  But as a very quick, easy formula in most cases, the rule of 72 is great to use.

## The Rule of 72 and property

Obviously, this formula isn't just for savings accounts.  Let's say property in your local area has a long term capital growth rate of 5%.  How long would you estimate it will take for your property to double in value (barring some unforeseen market hiccup)?  72 divided by 5 is 14.4 years, so you could expect your property to double in 14 or 15 years time (all things being equal).

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