5 Ways to Use the Rule of 72 - wikiHow (2024)

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In what ways can you use the Rule of 72 choose two answers? ›

However, you can still use the rule of 72 to get an idea of how inflation will impact your buying power and when the cost of living will double. You can do this by dividing 72 by the average inflation rate. Tracking investment costs. The rule of 72 can help you account for all fees and other expenses, even minor ones.

Do you know the Rule of 72? It's an easy way to calculate just how long it's going to take for your money to double. Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.

Answer. The Rule of 72 is a heuristic used to estimate the time required for an investment to double at a given annual interest rate. Other applications include estimating the time for money's value to halve due to inflation, the effect of fees on investments, and the doubling time of a country's population.

The Rule of 72 states that by dividing 72 by the annual interest rate, you can estimate the number of years required for an investment to double. The Rule of 69.3 is a more accurate formula for higher interest rates and is calculated by dividing 69.3 by the interest rate.

Manage Inflation: Beyond investments, the Rule of 72 can help you understand how inflation might erode your purchasing power. By dividing 72 by the average inflation rate, you can estimate how long it'll take for the cost of living to double, aiding in long-term financial planning.

The Rule of 72 helps you determine how long it might take for your money to hypothetically double. It's worth noting, the “rule of 72” definition isn't necessarily perfectly accurate because past market results do not predict future market behavior.

You can also apply the Rule of 72 to debt for a sobering look at the impact of carrying a credit card balance. Assume a credit card balance of $10,000 at an interest rate of 17%. If you don't pay down the balance, the debt will double to $20,000 in approximately 4 years and 3 months.

The rule of 72 can help you get a rough estimate of how long it will take you to double your money at a fixed annual interest rate. If you have an average rate of return and a current balance, you can project how long your investments will take to double.

To double your money in 10 years, get an interest rate of 72/10 or 7.2%.

In brief, the rule of 72 allows you to calculate a good approximation to how long it will take for your money to double at any compound interest rate. The doubling time is derived by dividing the interest rate into 72. So at 6% your money will double in 12 years, at 9% in 8 years, etc.

How to do the rule of 70? ›

The Rule of 70 Formula

Hence, the doubling time is simply 70 divided by the constant annual growth rate. For instance, consider a quantity that grows consistently at 5% annually. According to the Rule of 70, it will take 14 years (70/5) for the quantity to double.

The number of years it takes for a certain amount to double in value is equal to 72 divided by its annual rate of interest.

True. The “Rule of 72” tells you how long it will take to double your money. To use the “Rule of 72,” divide 72 by the interest rate you're getting. For example, if you deposit $3,000 into an account with a 2% interest rate, divide 72 by 2.