How long does it take to double your money? (2024)

FAQs

How long does it take to double your money? ›

It's called the Rule of 72. The principle is simple. Divide 72 by the annual rate of return to figure how long it will take to double your money. For example, if you earn an 8 percent annual return, it will take about 9 years to double.

The Rule of 72 is a calculation that estimates the number of years it takes to double your money at a specified rate of return. If, for example, your account earns 4 percent, divide 72 by 4 to get the number of years it will take for your money to double. In this case, 18 years.

Very few investors know how long it takes to double their money. Rule of 72 can be of help. Divide 72 by the expected rate of return and the answer is the number of years required to double your money. For example, if a bond offers 6 percent rate of interest per year, then you will double your money in 12 years.

For example, the Rule of 72 states that $1 invested at an annual fixed interest rate of 10% would take 7.2 years ((72 ÷ 10) = 7.2) to grow to $2. In reality, a 10% investment will take 7.3 years to double (1.10^7.3 = 2).

The Rule of 72 states that by dividing 72 by the annual interest rate, you can estimate the number of years required for an investment to double. The Rule of 69.3 is a more accurate formula for higher interest rates and is calculated by dividing 69.3 by the interest rate.

You can get more than 11 per cent from a new retail bond if you tie up your money for three years, but it doesn't come without risks.

Using the classic rule of 72, an investor can estimate how long it takes to double their money. At 7% annual returns, an investor would see $10,000 grow to $20,000 in about a decade by taking 72 and dividing it by 7%, the rate of return.

For example if you wanted to double an investment in 5 years, divide 72 by 5 to learn that you'll need to earn 14.4% interest annually on your investment for 5 years: 14.4 × 5 = 72. The Rule of 72 is a simplified version of the more involved compound interest calculation.

How to turn 100k into 1 million? ›

There are two approaches you could take. The first is increasing the amount you invest monthly. Bumping up your monthly contributions to $200 would put you over the $1 million mark. The other option would be to try to exceed a 7% annual return with your investments.

Assuming an annual return rate of 7%, investing $50,000 for 20 years can lead to a substantial increase in wealth. If you invest the money in a diversified portfolio of stocks, bonds, and other securities, you could potentially earn a return of $159,411.11 after 20 years.

If you earned around $50,000 per year before retirement, the odds are good that a $300,000 retirement account and Social Security benefits will allow you to continue enjoying your same lifestyle. By age 55 the median American household has about $120,000 saved for retirement, and about $212,500 in net worth.

The seven percent savings rule provides a simple yet powerful guideline—save seven percent of your gross income before any taxes or other deductions come out of your paycheck. Saving at this level can help you make continuous progress towards your financial goals through the inevitable ups and downs of life.

For example, if you invest $10,000 at 10 percent compound interest, then the “Rule of 72” states that in 7.2 years you will have $20,000. You divide 72 by 10 percent to get the time it takes for your money to double. The “Rule of 72” is a rule of thumb that gives approximate results.

This tells you that, at a 6% annual rate of return, you can expect your investment to double in value — to be worth $100,000 — in roughly 12 years. When calculating the Rule of 72 for any investment, note that the formula is an estimation tool and the years are approximate.

1 At 10%, you could double your initial investment every seven years (72 divided by 10). In a less-risky investment such as bonds, which have averaged a return of about 5% to 6% over the same period, you could expect to double your money in about 12 years (72 divided by 6).