Definition
A mental shortcut for compounding: divide 72 by an annual growth rate to estimate the years needed for money to double. It works in reverse too (72 divided by years gives the required rate) and applies to costs like inflation and fees as well as returns.
Why it matters
The rule turns abstract percentages into felt time: 7% growth doubles money in about a decade, while 3% inflation halves purchasing power in about 24 years. It makes the long-term price of low returns and high fees intuitive without a spreadsheet.
Example
At 8% average growth, 72 divided by 8 says money doubles roughly every 9 years: $50,000 becomes about $100,000, then $200,000, then $400,000 over 27 years. Parked at 2% instead, the first double alone takes about 36 years.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.