For today’s Money Monday I thought I’d share a simple mathematical way to help you figure out how long it takes to double your money.
Recently I was having a conversation with my daughter and she mentioned to me that she wanted her savings to double. So I explained to her the Rule of 72. This was something my dad shared with me when I was young, and I have referred to it often.
How to Double Your Money
The Rule of 72 is a simplified mathematical version of how to determine how long it will take to double your money. You take the amount of interest that you will be earning and divide 72 by that number. The result is the number of years it will take to double your money.
Meaning, if I can earn 8% interest then you divide 72 by 8 (72 ÷ 8) and you will find out that it will take about nine years to double your money. This takes into account that you are using an annual compound interest rate, and this shortcut works best for interest rates between 6% and 10%.
I have always been a bit fascinated by this “trick”. Since the number 72 is divisible by 2, 3, 4, 6, 8, 9, and 12, it makes it easy to get a reasonable answer to how long it will take to double your money.
The net step then is to look for investments that will offer you a return that you are looking for with a risk level that you are comfortable with.