How quickly will your money double? The Rule of 72.
In short: Understand the fundamental mechanics of compound interest with a simple mental shortcut. This tutorial explains how to estimate investment growth and debt costs without needing a complex calculator.
Interest serves as the backbone of modern capital markets, functioning either as a return on assets for lenders or the cost of capital for borrowers. By understanding compounding—where interest is earned on previously accumulated interest—investors can better project long-term growth.
The Rule of 72 provides a reliable 'rule of thumb' for mental math. It allows you to approximate the number of years required for an investment to double by dividing 72 by the annual interest rate.
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Sources
- Summary by Intellect · source: The rule of 72 for compound interest | Interest and debt | Finance & Capital Markets | Khan Academy
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