The Rule of 72: How it works?
The rule is straightforward: divide 72 by your expected annual rate of return, and the result gives the number of years needed to double your investment.
For example:
At a 12% return, 72 ÷ 12 = 6 years.
At an 8% return, 72 ÷ 8 = 9 years.
Experts note that even small changes in returns can make a big difference. A rise from 8% to 10% trims almost two years off the doubling timeline. The rule is most reliable for returns between 6% and 12%, beyond which compounding calculations become less accurate.The Rule of 72 gives investors a practical way to visualise compounding, making wealth-building strategies easier to plan. Instead of relying only on projections, it helps turn investing into a measurable process with clear timelines.In another post, the same financial expert cautioned salaried employees about today’s volatile job market marked by layoffs, pay cuts and hiring freezes. His advice: create an emergency fund that can cover at least 12 months of expenses.Why 12 months? Job searches at senior levels often take 6–9 months, and during recessions the wait can be longer. A year’s buffer ensures financial stability without rushing into unsuitable offers.
Where to keep it? He suggested splitting the money — 50% in a high-yield savings account or liquid fund for easy access, and 50% in ultra-safe instruments like fixed deposits or treasury bills.
The posts underline two essentials of personal finance: understand how compounding works to grow wealth, and build an emergency cushion to stay resilient during uncertain times. Together, they serve as a reminder that smart money decisions are less about luck and more about preparation.
