There are a number of ways to determine how quickly your money will grow, but here’s a simple one: Use the rule of 72. It’s easy: Divide your anticipated rate of return into 72, and that’s how long it will take you to double your investment. For example, say you have $10,000 and you anticipated receiving an 8% annual return. Divide 8 into 72; it should take approximately 9 years for you to have $20,000.
The differences in return can have a dramatic effect. Averaging a 10% return will take a little over 7 years to double your money; a 5% return will take over 14 years. Remember, the rule of 72 is a way to estimate the effects of different rates of return. It assumes that your return will remain stable. So it’s not perfect but it can give you a quick sense of the dramatic effect different rates of return have on your ability to build wealth.