Is it possible to double your money in five years, without doing any work? Can your money just sit there and double within a specific time frame? What can you do to double your money in five years, or 6 years or ten years? Is there anyway to do this? Yes, with the magic of annually compounded interest. If you are earning annually compounded interest on your money, it is possible to calculate how long it will take that money to double.
Discover the Rule of 72. This is a principle that investors use to calculate how long it will take for a sum of money to double.
Apply the Rule of 72. To do this, divide 72 by an interest rate. The answer will be how many years it will take money to double if earning that interest rate. For example, if you divide 72 by 12 (to represent 12 percent interest) the answer will be 6. It will take 6 years for money to double if earning 12 % annually compounded interest.
Calculate how much interest you would need to earn to double your money in 5 years. To do this, divide 72 by 5. The answer is 14.4. You would need to earn 14.4% annually compounded interest for your money to double in 5 years.
The Rule of 72 is fairly accurate for interest rates of 20% or less.