The of Rule of 72 calculates the time required to double your investments.

It will tell you approximately how long it will take for your money to double if invested and reinvested at compound interest.

Take the expected rate of growth and divide it into 72 to equal the number of years to double your money. 

For example: Divide 4 into 72, and you get 18 years, which is a long time. But increase that growth to 8% and it will take just 9 years, which is only half the time and much more appealing. Also, if the 8% were to apply over 18 years, then your money would quadruple.  (100,000 would grow to $400,000).

However, the rule will also tell you how long it takes for your money to reduce by 50% in value, given a rate of inflation.

For example:  Lets assume that the rate of inflation over the past 12 months rose to 5.6%. Divide 5.6 into 72, and you get just under 13 years. Divide 10 into 7.2 and the purchasing power of each of your dollars will half in no time at all.

While the Rule of 72 calculation works well for rates of compound interest and inflation of 10% and below, it becomes less accurate when interest rates and inflation head up into higher double digits.

Still, you can appreciate how the Rule of 72 works....and use it as a Rule of Thumb!