Rule of 72

Unlocking the secret to how your money doubles.

At DMV Financials, we believe financial literacy is the first step toward financial independence. One of the most powerful tools in your wealth-building toolbox is a simple concept known as the Rule of 72—a shortcut that helps you estimate how long it takes for your money to double through compound interest.

What Is the Rule of 72?

It’s a quick formula:
72 ÷ your annual interest rate = number of years it takes to double your money.

This rule works best for interest rates between 4% and 15% and helps illustrate the impact of compound interest over time—something every wealth-builder should understand.

Why It Matters

The earlier and smarter you invest, the more time your money has to work for you. Compound interest means you earn interest not just on your original investment—but on the interest it already earned. That’s how wealth accelerates.

Example

You invest $10,000 at an 8% annual return.

72 ÷ 8 = 9 years
In 9 years, that $10,000 becomes $20,000.
In another 9 years, $20,000 becomes $40,000.
Let the compounding continue, and it’s easy to see how small differences in rate can create massive outcomes.

The Real Power of Compounding

Interest Rate Years to Double Result at Age 65 (starting at 29 with $100K) 4% 18 years ~$400K 8% 9 years ~$1.6M 12% 6 years ~$6.4M

The difference between 4% and 12% isn’t just about doubling faster—it’s exponential. A small bump in your return can result in a dramatically different financial future.

Smart Growth in a Low-Interest World

With traditional savings rates still low, relying solely on bank interest may no longer cut it. That’s why it’s crucial to explore smarter, diversified strategies—whether that’s indexed accounts, IULs, ETFs, or other compounding vehicles tailored to your goals.