Rule of 72

Training 295 minutesrule of 72

Your brother, 38, runs a small bakery. He has $5,000 in savings, $2,000 on a credit card and a two-year-old daughter. You show him a simple trick: 72 divided by the rate.

Training goal: Do doubling math in your head

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Situation

1. Your brother's savings earn 2%. Another solid bank pays 6%.

Move to 6%
Stay, the gap is only 4%
Split it evenly between the banks

2. The card holds $2,000 at 24%. Your brother pays the minimum.

Keep paying the minimum, no rush
Open a new card and shift the debt
Pay the card from savings, keep $3,000

3. An acquaintance pitches a "project": double your money in a year, guaranteed.

Put in $1,000 as a test
Decline: no one pays 72% a year risk-free
Ask who else has invested

4. Your brother wants to keep his retirement reserve in cash for 20 years. Inflation runs about 4%.

Long-term money into diversified assets
Cash is the safest
Put everything into gold

5. Your brother sets aside $5,000 for his daughter and leaves it alone for 18 years. What will it be at 8% a year?

About $12,200: 8% × 18 years
About $40,000: doubling every 4 years
About $20,000: two doublings

What you will learn

72 / rate = years to double. 6% = 12 years, 9% = 8 years.
It works for debt too: 24% doubles a balance in 3 years.
And for inflation: at 4% prices double in 18 years.

Your real-life step

Divide 72 by your savings rate and by your credit card rate. Compare the two numbers.

Questions and answers

How does the rule of 72 work?

Divide 72 by the annual rate in percent to get the approximate years to double. At 8% that is 72 / 8 = 9 years.

How accurate is the rule of 72?

For rates of 6 to 10% the error is under half a year. At very low or very high rates it gets less precise.

Does the rule of 72 work for inflation and debt?

Yes. 72 / inflation shows when prices double, and 72 / loan rate shows when an unpaid debt doubles.

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Numbers are illustrative. A game, not financial advice.