Rule of 72 — How Fast Will You Double Your Money?

What is the Rule of 72?

Rule of 72 is a quick way to estimate in how many years an investment will double. Simply divide 72 by the annual rate of return.

Formula: 72 ÷ rate of return (%) = years to double

Examples

Practical Example

You have 50,000 PLN in a savings account (2% annually). Doubling to 100,000 PLN will take 36 years.

The same 50,000 PLN in an S&P 500 ETF (historically ~10% annually) will double in ~7 years. And then double again in another 7 years → 200,000 PLN after 14 years.

Why is the Rule of 72 So Useful?

• Mental calculator — you don't need a spreadsheet
• Comparing options — quickly see the difference between savings account and ETF
• Motivation — visualizing money doubling encourages investing
• Inflation works the other way — with 6% inflation your money loses half its value in 12 years

Rule of 72 & Inflation

You can reverse the Rule of 72: 72 ÷ inflation = years to lose half purchasing power.

With 4% inflation: 72 ÷ 4 = 18 years — in 18 years your 100,000 PLN will buy what 50,000 PLN buys today.

This is why keeping money "under the mattress" or in non-interest accounts is risky — inflation eats it away.

Limitations of Rule of 72

• Approximation — accurate for 5-15% rates, less precise for extreme values
• Assumes constant return rate — in reality rates change
• Doesn't account for taxes — real after-tax return is lower
• Doesn't account for fees — fund's TER reduces effective rate

Tax Correction

For Polish investors: real rate = gross rate × 0.81 (after 19% Belka tax). ETF with 7% gross = 5.67% net → doubling in ~13 years instead of 10. Unless you invest through IKE — then tax = 0%.

How Freenance Can Help

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