Investment: How fast will your money double? In how many days will it be reduced to half? This one formula will tell you both things..

Formula 72: Whenever it comes to investment, people first think about how many days or years it will take for their money to double. In simple words, people are more attracted to the fact that how many days it will take for their money to double than the interest rate and return. There is a simple formula for this, which is called Formula 72.

This formula tells you how many years it will take for your money to double in any investment plan. For this, you just have to divide 72 by the interest rate of that scheme. The smaller the number, the sooner your money will double.

What is Formula 72?

Formula 72 is a shortcut for math, which is very popular among investors. With its help, you can understand how many days it will take for your money to double if you invest it in a scheme or plan. The method is very easy. You do not even need a calculator for this. Its formula is-

72 ÷ Interest Rate = Years taken for the money to double

Let's understand with an example.

Suppose you have made a fixed deposit (FD) of Rs 5 lakh in a bank (Bank FD). The bank is giving you 7.25% annual interest on it. If you put this in the formula, you will get a figure of 9.93. That means your money will double in about 10 years. To simplify it further, after 119 months, your Rs 5 lakh will become Rs 10 lakh.

Now see from the formula- 72 ÷ 7.25 = 9.93 years.

Understand Rule 72 from a simple table
Interest rate (%) Time to double (years)
6% 12 years
7% 10.2 years
8% 9 years
10% 7.2 years
12% 6 years

Inflation and the value of money
Formula 72 not only tells the time of doubling, but it also shows how inflation eats away the value of your money. Suppose the average inflation rate is 6% per year. Let's apply the formula to this-

72 ÷ 6 = 12 years

This means that after 12 years, the value of your money, that is, its purchasing power, will be halved. If you have 10 lakh rupees today, then after 12 years, its value will be just 5 lakh rupees.

Effect of inflation in the table
Inflation (%) Time for money to be halved (years)
4% 18 years
5% 14.4 years
6% 12 years
8% 9 years
10% 7.2 years

How will Rule 72 be useful in retirement planning?
Retirement is always a long-term target. Here, Rule 72 is the biggest weapon in understanding the future of your money. You can understand many things from this.

You will be able to know when your investment will double.
You will also be able to understand when the value of money will decrease due to inflation.
This will help you decide how much investment is necessary every year
How much money will you need at the time of retirement

Why do investors consider Rule 72 necessary?
Simple language and easy math
Works in a bank, FD, mutual fund, share or any scheme
It becomes easy to understand and compare investments
Helps in retirement planning
Does not let the impact of inflation be ignored

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