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%.

rule of 72Say 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.

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