What is the rule of 72, and how can it help me with my savings?

Two women sitting together on their bed, reading over their notes and using the rule of 72 to calculate their savings growth Image: Two women sitting together on their bed, reading over their notes and using the rule of 72 to calculate their savings growth

In a Nutshell

The rule of 72 estimates how long it will take to double the money you have in an interest-earning account, like a savings account, or an investment account, such as a mutual fund. Using the rule of 72 can help you get an idea of how much your money can grow in a savings account based on accrued interest alone.

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Choosing which savings account is the best option to grow your money might seem overwhelming. If you want to get an idea of just how much your money can grow in an interest-bearing account, the rule of 72 can help.

People generally use the rule of 72 to estimate how an investment will grow over time — it’s also a handy way to determine how long it will take to save a certain amount of money via interest alone. Let’s review how the rule of 72 can help you make a plan to save a specific amount or save for a particular goal over time.


What is the rule of 72?

The rule of 72 is a quick “back-of-the-envelope” calculation that can help you estimate how long it’ll take to double your money at an expected rate of return. The rule of 72 is a rough estimate — for an exact calculation, we highly recommend using the U.S. Securities and Exchange Commission’s compound interest calculator.

How to use the rule of 72

To see how long it will take to double your funds using the rule of 72, simply divide the number 72 by the expected rate of return of your investment.

Let’s look at an example. Say you’ve got $1,000 deposited in an account that’s earning an annual interest rate of 3%.

72 ÷ 3 = 24

According to the rule of 72, it’ll take about 24 years for your initial investment of $1,000 to double to $2,000 at an expected annual growth rate of 3%. If you wanted to double your cash faster, you’d have to either continue depositing money into the account or find another account or other investment product with a higher interest rate — heads-up though, even high-yield savings accounts rarely earn interest at rates of 3% or higher.

The rule of 72 can also help you work backward to determine what interest rate you need if your goal is to double your money within a certain amount of time.

Let’s look at a calculation of what interest rate you’d need to double your money in 35 years.

72 ÷ 35 = 2.06

According to the rule of 72, you’d need an interest rate of 2.06% in order to double your money every 35 years.

Here’s a table with some more examples.

Compound interest rate Years to double initial deposit
1% 72
5% 14.4
10% 7.2
12% 6

Take note: If you’re putting your money in a savings account, you likely won’t find rates higher than 3%. But if you decide to invest your money, you might find higher annual rates of return (though at higher risk to your invested funds).

How can I apply the rule of 72 to my savings account?

For a savings account, interest is the money that a financial institution pays you as an incentive to keep your funds deposited in its account. Called an annual percentage yield, or APY, it’s expressed as a percentage.

Financial institutions calculate interest as either compound interest or simple interest. Compound interest is the amount you earn on your original investment (and any additional deposits you make) plus an amount earned on any existing accrued interest. Calculating interest this way can help power-charge your savings, helping to grow your money faster.

Simple interest, on the other hand, only accrues on your deposits and not on earned interest. Simple interest is rare.

The rule of 72 can give you a rough calculation of how long it will take to double your initial deposit into a savings account with compound interest — or what interest rate you need to double your money within a certain amount of time.

For example, if you’re saving with a specific goal in mind, like building up your emergency fund or saving for a large purchase, putting your money in a savings account rather than leaving it in a no-interest checking account may help you grow your money faster.

How to compare interest rates using the rule of 72

Using the rule of 72, you can compare interest rates from different lenders to determine which bank offers the best return on your deposit.

If you want to double your money within a certain amount of time — let’s say 30 years — you’ll want to look for a savings account that yields at least 2.4% interest. Here’s the math.

72 ÷ 30 = 2.4%

This means that whether you invest $1,000 or $10,000 into an account with a 2.4% APY, your investment will double in 30 years, thanks to compound interest.

If you’re weighing out savings account offers from different banks, you can also use the rule of 72 to roughly calculate how quickly your savings would double on interest alone at the banks’ advertised rates. The higher the interest rate, the faster your money will grow — but it’s a good idea to consider other factors, like ATM network and online tools, when choosing a bank as well.


What’s next?

Now that you understand how the rule of 72 works, you can use it to quickly calculate the time it will take to double your savings or figure out what interest rate you’ll need to meet your savings goals fastest.

Remember to shop around for a savings account that will yield the best return on your deposit, while also considering how accessible your funds are.


About the author: Sarah Archambault is a freelance writer based in New England. She enjoys learning new ways to spend money wisely and helping others figure out how to make smart financial decisions. Sara… Read more.