The Power of 72
This rule of thumb allows you to see how your investment will grow over time. If you divide 72 by the rate of return you are receiving, the answer is the number of years it will take your investment to double. Conversely, if you want to double your money in 8 years, divide 72 by 8 and you will see that you must earn an effective rate of return of at least 9% to reach your goal.
Your investment will double in value over time if the interest is compounded. The time your investment doubles can be determined by dividing the interest rate into 72. For example, $1,000 invested at 6% will become $2,000 in 12 years (72 ÷ 6 = 12). This is the power of compound interest.
Use this form to calculate the effects of compound interest on your investment. (NOTE: amounts are estimated and for illustrative purposes only.)
Compound versus Simple Interest
Although compound interest is the most common type used today, you may still see some examples of simple interest. This page will tell you more about compound interest and compare compound and simple interest.