The Rule of 72

Posted By: Dr. Frugal in Saving on 06/07/2007 at 15:53:14

The Rule of 72 (as it's called in some circles, including mine) essentially tells you how long it will take any current savings or investment to double. For example if you have $100 earning 8%, 72/8 = 9. So it will take nine years for that $100 to grow into $200.

Conversely, you can also use this to figure out how quickly your credit card debt is. I use credit card debt in the example only because they typically have extremely high interest rates. If you have $8,000 of credit card debt at 20% interest it will become $16,000 in just over three years. Feeling more motivated to pay it off now·

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