Start Thinking In Terms of Rule of 72
Most people think of the Rule of 72 as a quick way to calculate how long it takes to double an investment, but did you know this simple formula applies to much more than just money? How the Rule of 72 works with respect to investments and ways to double money is explained in the article Double Your Money: A Simple Formula.
This article will look into many applications of the rule of 72 from population growth to inflation and even bacteria multiplication. Anything that grows at a compounded rate can be analysed using the Rule of 72.
Understanding these real-world examples of Rule of 72 can help you make smarter financial choices, predict trends, and even understand how quickly things can change in different areas of life.
So, let’s explore the many applications of the Rule of 72—and why it matters beyond just investments!
Practical Uses of Rule of 72 Beyond Investing
The Rule of 72 is most commonly used to calculate investment returns, for example how long would it take to double your money. But its usefulness doesn’t stop there. Let’s look at many other ways this powerful formula applies in real life.
Inflation and Cost of Living
- If inflation is 6% per year, the cost of living will double in just 12 years (72 ÷ 6 = 12).
- If inflation is 4% per year, prices will double in 18 years.
This is why saving money in low-interest accounts can be dangerous. You might think your money is growing, but inflation is reducing its real value over the long term.
Credit Card Debt & Interest
The Rule of 72 doesn’t just show how fast money grows—it also shows how fast debt can spiral out of control. For example:
- If your credit card charges 18% interest, your debt will double in just 4 years (72 ÷ 18 = 4).
- If you only make minimum payments, you could end up paying double or more for your original purchases.
This is why paying off high-interest debt quickly is crucial. It can save you thousands of pounds in interest over time.
Housing Growth
Ever wondered why some cities grow faster than others? The Rule of 72 can help explain why some areas boom while others stay stagnant.
For example, if the number of new homes in a city increases at 9% per year, the total number of homes will double in just 8 years (72 ÷ 9 = 8).
This means a small town can become a major city in just a couple of decades! This principle is useful for real estate investors, city planners, and home buyers who want to understand long-term housing trends.
Population Growth
The Rule of 72 also applies to population growth, helping us predict how fast cities, countries, or even the global population might expand.
For example, if a town’s population is growing by 3% per year, it will double in 24 years (72 ÷ 3 = 24).
Similarly, if a country is growing at 2% per year, its population will double in 36 years. This is why some countries experience rapid urbanization, while others maintain steady populations.
Virus Spread
One of the many applications of the rule of 72 is in the science and medical fields! Many bacteria and viruses grow exponentially, meaning they double at a fixed rate.
For example, some bacteria can multiply at a rate of 30% per hour, meaning they can double in just 2.4 hours (72 ÷ 30 = 2.4). This is why infections can spread so quickly—and why treatments need to act fast! During the Covid-19 pandemic, it was important to understand not just how many people were infected but, just as importantly, the rate at which the virus was spreading to understand the magnitude of the potential problem.
Medical researchers use exponential growth formulas like the Rule of 72 to study how diseases spread and how fast bacteria multiply.
Why Understanding the Many Applications of the Rule of 72 is So Powerful
The Rule of 72 isn’t just a financial trick—it’s a universal growth formula. As described above there are many applications of the Rule of 72. Whether it’s money, housing, inflation, debt, or even biology, the same simple math applies.
By understanding this concept, you can:
- Predict how fast your investments will grow
- See how inflation will impact your savings
- Avoid high-interest debt traps
- Understand real estate and business growth trends
The next time you see something growing at a steady rate, try using the Rule of 72—you might be surprised at what you discover!
The Rule of 72 is an easy yet powerful tool that helps you understand how long it takes for things to double (or reduce). Whether you’re tracking investments, prices, debt, or even social media growth, this formula is a must-know concept.