One can calculate the TIME PERIOD that their money will take to double using Rule of 69. Rule of 69 calculator takes into account the compound interest rate given for such investment.
Usually, financial planners and personal accountants use these rules, but I feel that everyone should be aware of them.
Using these rule they can manage their finances in a better way and can plan their investments accordingly.
You can estimate the correct number of years that your money will take when invested at a fixed compound interest rate using this formula:
RULE OF 69 FORMULA = (69/INTEREST RATE) + 0.35 YEARS
Example, let us say we get a 10% constant compound interest rate, as per Rule of 69:
=(69/10) + 0.35 years = (6.9+0.35)Years = It will take 7.25 Years (estimated) to double your money at 10% interest rate.
With the help of this rule, anyone having a constant compound interest rate can calculate the number of years that their money will take to double without the use of a spreadsheet or a financial calculator.
Rule of 72 Formula
The Rule of 72 is similar to the rule of 69. Rule of 72 Calculator also gives us an estimate of the number of years it will take to double our money when given a constant compound interest rate.
Here the compound interest rate is divided from 72
RULE OF 72 FORMULA = 72/INTEREST RATE
Rule of 72 is usually used when the interest rates are low (between 3 to 18%) to calculate estimated years.
While the rule of 69 can be used for any interest rate figure. Some authors suggest using Rule of 72, but in fact, both the rules are derived using similar mathematics.
Rule of 72 is also used to calculate the inflation effect, let’s say inflation is 6% p.a. Using the rule of 72 formula, you will get 12 years (72/6).
The 12 years here suggests a product sold today at Rs. 100 the same product will be sold at Rs. 200 after 12 years.
Rule of 72 was discovered by Italian friar Luca Pacioli, in his 1494 book “Summa de arithmetica geometria, proporzioni et proporzionalita,” a guide to arithmetic, algebra, geometry, accounting and weights, and measures.