# Rule of 72

Rule of 72 Reveals Number of Years for Principal to Double:

The **rule of 72** is a handy formula for figuring the number of years it takes to double the principal using compound interest. You simply divide the interest rate that the money will earn into the number 72. For example, if interest is compounded at a rate of 7 percent per year, your principal will double in 10.3 years (72 /7); if the rate is 6 percent, it will take 12 years (72/ 6)

The rule of 72 also works for determining how long it would take for the price of something to double given a rate of increase in the price. For example, if college tuition costs were rising 8 percent per year, the cost of a college education would double in just over nine years. In addition, the rule of 72 can be used to calculate the number of years before prices will double given a certain inflation rate. Just divide the inflation rate into 72.