Rule of 72: how many years to double your money in India
Divide 72 by the return: an FD at 7% doubles money in about 10 years, equity at 12% in 6. And doubling in 5 years needs 14.4% a year.
5 min read
How many years does it take to double your money? You don't need a calculator: divide 72 by the yearly return. SEBI's own investor booklet teaches it that way,[1] and so does the National Centre for Financial Education.[2] Here it is worked through for a savings account, an FD, PPF and equity funds.
What is the Rule of 72?
Divide 72 by the rate. That's it. It works for any yearly return, and it's old: Luca Pacioli wrote it down in 1494 without explaining it, so it likely predates him.[3]
| Where | Rate | 72 ÷ rate | Exactly |
|---|---|---|---|
| Savings account | 3% | 24.0 yrs | 23.4 yrs |
| Fixed deposit | 7% | 10.3 yrs | 10.2 yrs |
| PPF | 7.1% | 10.1 yrs | 10.1 yrs |
| Equity funds | 12% | 6.0 yrs | 6.1 yrs |
Between 4% and 15% a year the rule lands within 0.3 years of the exact answer. That's close enough to compare choices in your head.
How many years to double money in an FD, PPF or equity?
Figure 1 from the Lumpsum calculator
₹1 L left alone for 24 years
- ① Savings account₹2 L
3% a year: doubles every 24.0 years
- Fixed deposit₹5.1 L
7% a year: doubles every 10.3 years
- PPF₹5.2 L
7.1% a year: doubles every 10.1 years
- ② Equity fundsDoubles most₹15.2 L
12% a year: doubles every 6.0 years
How to read it
- 1At 3% the money doubles once in 24 years, to ₹2 L. In today's money that's about ₹50.2K: it bought more on day one.
- 2At 12% it doubles every 6.0 years, four times over, to ₹15.2 L. Equity returns swing year to year and aren't guaranteed.
A few points of return don't look like much in one year. Over decades they decide how many times your money doubles.
How to double your money in 5 years
Run the rule backwards: 72 ÷ years gives the return you need.
| Double in | Return needed |
|---|---|
| 5 years | 14.4% a year |
| 7 years | 10.3% a year |
| 10 years | 7.2% a year |
Doubling in 5 years needs about 14.4% a year, every year. No FD or PPF pays that. Equity has done it over some five-year spells and fallen well short in others, so a promise to double your money in 5 years is a reason to be careful.
Rule of 72 and inflation
At 6% inflation, prices double in 12 years. A family spending ₹50,000 a month today needs about ₹1 lakh a month for the same life in 12 years. Cash earning less than inflation is shrinking, even when the balance goes up.
Try it with your numbersLumpsum Calculator₹1 L at 12% for 24 years is filled in. Change the rate and watch the doublings.
What this doesn't mean
- Rates here are typical, not quotes. Banks set savings and FD rates; PPF's is set each quarter; equity returns aren't promised.
- Tax slows doubling. FD interest is taxed at your slab; equity gains above ₹1.25 lakh a year pay 12.5%.
- Higher return means more risk. Money for the next few years belongs somewhere steady, even if it doubles slower.
Returns compound yearly, before tax. Today's money uses 6% inflation. For illustration only.
Sources
- [1]Financial Education Booklet, p. 8: the Rule of 72 (opens in a new tab)SEBI and NISM
- [2]Financial Education Handbook, p. 6: years to double = 72 ÷ interest rate (opens in a new tab)National Centre for Financial Education (RBI, SEBI, IRDAI, PFRDA)
- [3]Summa de arithmetica, the first written Rule of 72 (opens in a new tab)Luca Pacioli, via Wikipedia · 1494