Rule of 72
Certified Financial Planner glossary · Certified Financial Planner
Definition
A quick approximation for doubling time: 72 divided by the annual percent return. It is an estimate, not exact compound math.
Rule of 72 in plain English
Someone says "at 8% you double in nine years" and treats the shortcut as gospel on a graded time-value item. The Rule of 72 approximates doubling time as 72 divided by the annual percent return; it is a quick estimate, not exact compound math. When the stem wants precise time-value results, use the financial calculator and the stated compounding assumptions. Overconfidence in the shortcut, or treating it like a statute, is the trap that costs the point.
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