Making Your Savings Decisions

The Rule of 70 is a mathematical rule of thumb that can be applied to the growth rate of anything.

$\text{Time to double } = \dfrac{70}{\text{Growth Rate}}$

If you divide the growth rate into 70, you get the approximate amount of time it takes for that thing to double in size. For example, to double $1,000 at a 10% annual interest rate, you will need about 70 ÷ 10 = 7 years.

Example of the Rule of 70

Mel has $500 in an account that pays 3.5 percent interest annually. Use the Rule of 70 to approximate how long Mel will need to have $1,000, $2,000, and $4,000, respectively.

1. From $500 to $1,000?

$\text{Time to double } = \dfrac{70}{\text{Growth Rate}} = \dfrac{70}{3.5} = 20years$

2. From $1,000 to $2,000?

$\text{Time to double } = \dfrac{70}{\text{Growth Rate}} = \dfrac{70}{3.5} = 20years$

3. It takes Mel about 40 years to grow the money from $500 to $2,000.