Quick Answer
The Rule of 72 provides a quick estimate of how many years it may take to double your money, while the Rule of 115 estimates how long it may take to triple it.
Divide 72 or 115 by the annual interest rate to get the approximate number of years. These rules are not exact, but they are easy to remember and useful for quick mental calculations.
The Rule of 72, Rule of 115 and Purchasing Power
Two quick estimation formulas
How long do you need to save before your money doubles?
If you have asked this question before, these two simple formulas can help you make a quick estimate.
Most people may have heard of the Rule of 72, but the Rule of 115 is less familiar. Both can be double-edged tools, so they should be used carefully.
What is the Rule of 72?
The Rule of 72 divides 72 by the annual interest rate to estimate how many years it may take for your money to double.
For example, assume RM10,000 grows at an annual interest rate of 3%:
72 ÷ 3 = 24
This means it may take about 24 years for RM10,000 to become RM20,000. The higher the interest rate, the shorter the estimated time.
What is the Rule of 115?
The Rule of 115 works in the same way. Divide 115 by the annual interest rate to estimate how many years it may take for your money to triple.
For example, assume RM10,000 grows at an annual interest rate of 3%:
115 ÷ 3 = 38.3
This means it may take about 38.3 years for RM10,000 to become RM30,000. Again, the higher the interest rate, the shorter the estimated time.
These rules are not exact
The number of years produced by these rules is not the most accurate result, but it is useful for a quick mental estimate and easy to remember.
For a more accurate estimate of doubling time, 69.3 can be used instead of 72, although 69.3 is harder to calculate mentally.
How can they estimate falling purchasing power?
The Rule of 72 and Rule of 115 can also be used to estimate how quickly money loses purchasing power.
For example, with inflation at 3%, the purchasing power of RM100,000 after 24 years would be roughly equivalent to RM50,000 today. After 38.3 years, it would be roughly equivalent to RM33,000 today.
Summary
The same force can work for or against you.
The original article uses the exaggerated example of keeping RM100,000 in a Milo tin to show how cash without interest loses purchasing power as inflation rises.
This is why, besides considering your risk tolerance, you should also consider whether the interest rate you use has a reasonable chance of helping you reach your financial goals.
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About the Author
Remuneration Disclosure
If you choose to arrange insurance, unit trusts or PRS through me and FA Advisory, I may receive commission from the relevant product provider. This commission is calculated separately from the financial-planning fee and does not offset or replace the planning fee. I will also explain the relevant arrangement and potential conflict of interest before implementation.
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Sources and Notes
This English article is a faithful translation of YFD's already-published Chinese post, 资产翻倍要多久？学会 72法则 115法则，你就懂！ (published 2 September 2022, updated 24 May 2024). The original article cites no other external sources.
Educational Purpose
This article is for general reference only and does not constitute personalised investment or financial advice. These rules provide quick estimates and are not exact calculations.
