What is Rule of 72？

The Rule of 72 is a simple formula used to estimate the number of years required to double an investment at a fixed annual rate of return. To use it, divide 72 by the annual interest rate (expressed as a whole number). For example, if the interest rate is 6%, it would take approximately 72 / 6 = 12 years to double the investment. This rule provides a quick way to gauge the effects of compound interest.

Why is Rule of 72 so important?

The Rule of 72 is useful in saving and investing because it helps you quickly estimate how long it will take for your savings to double at a given interest rate. This can aid in setting financial goals and making informed decisions about where to invest. By understanding the impact of compound interest, you can choose savings vehicles that align with your timeline and financial objectives, ultimately enhancing your wealth over time.