Pretty much everyone knows that the name of the game is to get a good rate of return on your money. After all, you do not have to be a genius to know that getting 8% on your money is a better thing than getting a 6% rate of return. But, just how much better is it?

How long until your money doubles?

If you have a 12% average rate of return on your money (say, in an index fund), then your money will, all things being equal, double in just six years. Drop your rate of return down to 10% (still respectable by anyone’s definition) and now it takes a bit over seven years to double. Bump your rate of return up a bit and get a 13% average and your money doubles in 5 and a half years.

If you do not happen to be a math super genius, you can calculate how long it will take your money to double at a given interst rate by useing the rule of 72.

Money invested at 1% interest will double every 72 years. If you get a higher rate of return, just divide 72 by the rate of return and the answer is the number of years until your investment fund doubles.

Example:

I have $1000 and will put it in the bank at 5% interest. How long until I have $2000?

72 divided by 5 = 14.4 years (better not need it soon!).

While not precise, it is accurate enough for quick calculation and quickly shows the value in getting the highest rate of return possible on your money.