Do you know? There is a way you can calculate the time that will make your money double with the “Rule of 72”, all you need will be just interest rate and nothing else. Surprised? Well, it’s common and used by experts all the time.
First, understand how money gets double.
If you invest an amount in lump sum with a fixed rate of cumulative return, there is a substantial growth in the money over time. The money may even double due to the compounding of the returns every year.
With the method of the “Rule of 72,” you can calculate the time that will make your money double.
Here is the formula:
Years to double = (72) / (Interest Rate)
Let’s apply this formula to a real life case. Assume Mr. Mehta is planning to make an investment planning to double his money by investing ₹10,00,000 in Fixed Deposit where he’ll receive a fixed 4.9% of returns.
In this case, just divide the 72 with interest rate: 72/4.9 = 14.6938 Years.
So, it will take more than 14 years and 7-8 months for an FD to double its main amount.
Now test this with the manual calculations.
| Years | Initial Investment | Interest Rate | Interest Earned | Final Amount |
|---|---|---|---|---|
| 1 | ₹10,00,000 | 4.90% | ₹49,000 | ₹10,49,000 |
| 2 | ₹10,49,000 | 4.90% | ₹51,401 | ₹11,00,401 |
| 3 | ₹11,00,401 | 4.90% | ₹53,919.649 | ₹11,54,320.649 |
| 4 | ₹11,54,320.649 | 4.90% | ₹56,561.711801 | ₹12,10,882.360801 |
| 5 | ₹12,10,882.360801 | 4.90% | ₹59,333.235679249 | ₹12,70,215.59648025 |
| 6 | ₹12,70,215.59648025 | 4.90% | ₹62,240.5642275322 | ₹13,32,456.16070778 |
| 7 | ₹13,32,456.16070778 | 4.90% | ₹65,290.3518746813 | ₹13,97,746.51258246 |
| 8 | ₹13,97,746.51258246 | 4.90% | ₹68,489.5791165407 | ₹14,66,236.091699 |
| 9 | ₹14,66,236.091699 | 4.90% | ₹71,845.5684932512 | ₹15,38,081.66019225 |
| 10 | ₹15,38,081.66019225 | 4.90% | ₹75,366.0013494205 | ₹16,13,447.66154167 |
| 11 | ₹16,13,447.66154167 | 4.90% | ₹79,058.9354155421 | ₹16,92,506.59695722 |
| 12 | ₹16,92,506.59695722 | 4.90% | ₹82,932.8232509036 | ₹17,75,439.42020812 |
| 13 | ₹17,75,439.42020812 | 4.90% | ₹86,996.5315901979 | ₹18,62,435.95179832 |
| 14 | ₹18,62,435.95179832 | 4.90% | ₹91,259.3616381176 | ₹19,53,695.31343644 |
| 15 | ₹19,53,695.31343644 | 4.90% | ₹95,731.0703583854 | ₹20,49426.38379482 |
You can clearly see the results, it takes 14-15 years, exactly 14.6938 years.
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