Glossary
Rule of 72
The Rule of 72 allows you to calculate how long it will take your money to double at a certain interest rate.
Simply divide 72 by the interest rate you are receving and you have a very good estimate of the number of years it will take to double your money.
For instance at 12% interest your money will double in 6 years. At 6% interest your money will double in 12 years.
The rule of 72 is also useful for calculation how much you will owe on your credit cards at the current interest rate.
For example if you rate is 18% your credit card debt will double in four years.
Limitations
The Rule of 72 is only accurate for rates between 6 and 10 percent. Also it is only accurate for annual rates of return. If your money is compounded monthly you should use a different method.