The Rule of 72 is a mental math shortcut: divide 72 by an annual rate to estimate how many years it takes for a quantity to double.
Examples
- Investment at 8% annual return: 72 ÷ 8 = 9 years to double
- Credit card at 24% APR: 72 ÷ 24 = 3 years for debt to double
- Inflation at 3%: 72 ÷ 3 = 24 years for prices to double
- SaaS growing 50% YoY: 72 ÷ 50 = ~1.4 years to double ARR
Why does it work?
At rate r, the exact doubling time is ln(2) ÷ ln(1 + r). For small rates, this approximates to 0.693 / r. The Rule of 72 uses 72 instead of 69.3 because 72 is more divisible by common interest rates (2, 3, 4, 6, 8, 9, 12...).
Accuracy
The Rule of 72 is most accurate between 6–10% rates (< 1% error). For rates above 20%, use the Rule of 72 calculator which shows both the approximation and exact doubling time.