The Rule of 72: One Simple Rule That Shows the Power of Time

One of the first financial concepts I like to share with people is something called The Rule of 72.

It’s simple, powerful, and it helps people understand one of the most important forces in wealth building: compound growth.

The Rule of 72 is an easy way to estimate how long it takes for your money to double.

All you do is divide 72 by your rate of return.

For example, if your investments grow at 6% per year, you divide 72 by 6. That means your money could double in about 12 years.

If the return is 8%, it could double in about 9 years.

Now think about what that means over time.

If someone invests $100,000 and it doubles every 9 years, that could potentially grow to:

• $200,000

• $400,000

• $800,000

• and eventually over $1 million

This is why I always tell people: time is one of the most valuable assets you have when it comes to building wealth.

But the Rule of 72 also teaches another important lesson. It shows us how inflation works against us.

If inflation averages around 4%, the purchasing power of your money could be cut in half every 18 years.

That means the same money buys less and less over time.

So the question becomes simple:

Is compound growth working for you, or against you?

The earlier we start planning, the more time we give our money to work for us.

— Sahil Virani