If you often research interest rates, you may have already heard of this mathematical trick. It’s simple and can be done in the moment. In many cases, you don’t even need a calculator.
Imagine that you are at the bank, and they propose two types of savings — one with a yield of 2% per year and the other with a yield of 4%.
Also imagine that your goal is double the money you have in your accountand I would like to understand how many years it will take you to do this in both cases.
It’s easy: just take the number 72. Divide this number by the rate they propose and you will have the result.
In other words, in the case where you will make less profit per year, just 2%, the number of years it will take to double your money is 72 / 2 = 36 years. In the case of the most profitable rate, it will only take 72 / 4 = 18 years.
You don’t even need a calculator, but of course, if the numbers aren’t that round, you might need one. Still, the calculation is done quickly, with just one division.
Note, however, that this value is approximate. For lower profitability rates, between 2% and 5%, the Rule of 70 is more accurate (same calculation, but divide 70 by the rate instead of 72).
As noted, there are other more precise numbers to calculate, but as it is not so simple to do the calculations in your head, they are less used: the 69, or, even more correct, the 69.3.
As , this rule can also be used to calculate, for example, the inflation rate over the years. Now, if the inflation rate always remains at 3%, the Rule of 72 tells you that prices will double in 24 years (72 / 3 = 24).
Okay, now that you know the simple mathematical trick to calculate interest and savings, know that there is also one that allows you to calculate any date of any year.
