- Education and Science
How to calculate doubling your money problems easily and quickly
Probably one of the most impactful discoveries in the twentieth century was that of the effect of compounding. As with so many things in that century, Albert Einstein was behind this discovery. Einstein came up with an easy way to calculate doubling of money called the Rule of 72. The Rule of 72 comes handy especially when you need to quickly calculate doubling of money in your head, however then you usually do not need exact numbers, just round abouts. Below is a short and simple description of how it worlks.
If you want to know the period it take your money to double divide 72 by the annual interest rate (the percentage number not the absolute number derived from percentege)
eg.: If you earn 10% per year, the number of years it takes your money to double is:
So at 10% per annum interest (or dividend) it takes your initial deposit 7.2 years ( 7 years and 2 and a half months) to double.
The calculation of the annual return is along the same line:
What annual return do you need for your money to double in 6 years?
Answer: Simply divide 72 by the number of years, in this case, 6:
Thus, you need 12% interest every year for your money to double in 6 years.