Finance · level 1
Rule of 72
Divide 72 by the growth rate and you have the doubling time. It runs both ways, and stacking doublings gives you compound growth without a calculator.
Worked example: At 9% a year, how many years to double your money?
rate9%
doubling time8 yrs
two doublings16 yrs → 4×
Step by step
- 1
Rule of 72
72 / 9 = 8 years
- 2
Why it works
ln 2 ≈ 0.693, and 72 divides cleanly by 2, 3, 4, 6, 8, 9 and 12.
- 3
Backwards too
To double in 8 years you need about 9%.
At 9% a year, how many years to double your money? = 8
The theory behind it
Intuition
Compounding is exponential, but log(2) ≈ 0.69, so dividing 72 by the rate in percent lands within a few percent of the true doubling time for rates between 4% and 15%.
Common pitfalls
- ×Using 72 with rates far outside 4–15%, where the approximation drifts.
- ×Dividing by the decimal rate rather than the rate in percent.
In the interview
Growth and LBO rounds: 'at 12% a year, how long until revenue doubles?' — six years.