If you’ve heard about the wonders of compound interest, you’ve likely wondered how long it might take to double your money. 

The “Rule of 72” offers a simple trick that can give you a quick answer.

How It Works

Take 72 and divide it by the annual interest rate (or return) you expect on your investment. The result is the number of years it will take for your money to double.

As an example, let’s say you want to invest in an S&P 500 stock index fund or ETF. The S&P 500 index has averaged an annual return of nearly 10% in recent years, before inflation. While past performance is no guarantee of future results – and it’s important to understand you could lose money – you would double your initial investment over about 7.2 years if the S&P 500 index continues its 10% average over that period.

72 ÷ 10 = 7.2 years

Compare that return to a high-yield savings account or certificate of deposit (CD) earning 3.5% interest:

72 ÷ 3.5 = 20.6 years

Risk vs. Reward

Of course, every savings and investment product has different risks and returns. 

Some differences include how readily individuals can access their money when needed, how fast their money will grow, or how much risk is involved.

Keep in mind that higher returns typically mean higher risk, and that all investments carry risk. Understand your risk tolerance.

Investing in stocks or mutual funds or ETFs can offer strong long-term growth, but the value can go up and down during the short term – and even over consecutive years. Investing is a long game, meaning goals that are five years or more away.

Saving, on the other hand, is about preserving money — like setting aside cash for emergencies or short-term expenses. Savings accounts, CDs, or even treasury bills offer stability but usually slower growth.

Bottom Line

When you hear about the “Rule of 72,” remember:

• It is a helpful shortcut for financial planning.

• It illustrates how investing helps grow wealth over time.

• Always consider both the upside and the risks that come with investing.