The rule of 72 is a financial estimate of the effect of compound interest. It is useful for quick 'mental' calculation of how long it takes your money to double. The formula is simple,
Time to double = 72 / interest rate
For example, at 6% interest per annum, your investment doubles in 12 years (72/6 = 12). It also applies to other scenarios with growth rate. If a credit card issuer charges 3% interest per month on unpaid bills, total bills will double in 24 months. No wonder paying only the minimum amount doesn't make a dent in credit card billings.
There are many uses for this great financial estimate. How cool it is when you're able to apply this in a normal conversation, you can be a math genius!
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