1. What is the Rule of 72?

The Rule of 72 is a simple formula used to estimate the number of years required to double your money at a given annual rate of return. It's a quick, useful calculation that can help in retirement planning and investment decisions.

2. How Does the Calculator Work?

The calculator uses the Rule of 72 formula:

Where:

• \( Rate \) — Annual interest rate or rate of return (in percentage)
• \( Years \) — Estimated time to double the investment

Explanation: Dividing 72 by the annual rate of return gives you the approximate number of years it will take for your investment to double.

3. Importance of the Rule of 72

Details: This rule helps investors quickly estimate how long it will take for their money to grow without complex calculations. It's particularly useful for comparing different investment options.

4. Using the Calculator

Tips: Enter the expected annual rate of return in percentage (e.g., for 5%, enter 5). The rate must be greater than 0.

5. Frequently Asked Questions (FAQ)

Q1: How accurate is the Rule of 72?
A: It's an approximation that works best for rates between 6% and 10%. For more precise calculations, use the exact compound interest formula.

Q2: Can the Rule of 72 be used for inflation?
A: Yes, it can estimate how many years it will take for inflation to halve the purchasing power of your money.

Q3: Why 72? Why not another number?
A: 72 has many divisors and works well for common interest rates. It's derived from the natural logarithm and provides a good balance between simplicity and accuracy.

Q4: Does the Rule of 72 work for negative returns?
A: No, it only works for positive growth rates. For negative returns, different calculations are needed.

Q5: Are there variations of this rule?
A: Yes, the Rule of 69.3 is more accurate for continuous compounding, and the Rule of 70 is sometimes used for higher accuracy with lower rates.