Rule of 72

Rule of 72

dividing 72 by the interest rate will show you how long it will take your money to double.

$2,200, 18%, how long will it take to double

72/18=4years

Things to know about the Rule of 72

Only an approximation, Interest rate must remain constant, Can't add to the original amount, All interest is put back into the invesment, Doesn't include taxes.

What interest rate is needed to double $5,000 in 4 years

72/4=18%

$2,500, 6.5%, how long will it take to double

72/6.5=11years

What you can determine using the Rule of 72

How many years it takes an invesment to double, How many years it takes debt to double, The interest rate must earn to double in a time frame, How many times debt or money will double in a period of time.

Taxable Account

Taxes charged to earned interest, Paid after taxes

Tax Deferred Account

Taxes not paid until money is withdrawed