The rule of 72

Someone offers you an investment that pays 8% a year and you want to know, before the conversation moves on, how long your money would take to double. You don't need a calculator. Divide 72 by 8. The answer is 9 years.

This is the rule of 72. Divide 72 by a yearly rate in percent and you get the number of years it takes for money to double at that rate. It is an approximation, and at the rates you meet in everyday life it is a close one.

Between 4% and 12% the rule is within a few months of the exact figure. It drifts at very low and very high rates, which are the cases where you would want to work it out properly anyway.

It works on prices too

Inflation is a rate, so the same division applies to it. At 6% inflation, prices double in about 12 years. Said the other way, money that earns nothing loses half its purchasing power in 12 years.

That gives you a quick test for any account or product. Work out the doubling time of what it pays and the doubling time of prices. If prices double first, the money in it is shrinking in real terms even while the balance goes up.

Count the doublings you have left

The rule is most useful for seeing how much time is worth. At 11% a year, money doubles about every 6.5 years. Over 30 years that is 4 doublings. ₹10.00 L invested once and left alone becomes ₹1.60 Cr, before inflation is taken into account.

Wait one doubling period before you start and you lose the last doubling, which is the largest one. It is worth as much as all the earlier ones together. Compounding and the cost of waiting works through an example with monthly investing.