The Rule of 114 is a quick way to estimate how long it will take to triple your money with compound interest. The idea is simple: divide 114 by the annual interest rate (in %), and you will get an approximate answer in years.
- If you earn 10% annually, the time to triple your money is approximately: 114/10=11.4 years.
Similarly, the Rule of 144 works for quadrupling your money. Divide 144 by the annual interest rate to estimate the time.
- At 10% annual growth, the time to quadruple your money is: 144/10=14.4 years
Why Do These Rules Work?
These rules are approximations based on the exponential nature of compound interest. While they are not perfectly accurate for all rates, they are great for quick mental math, especially for interest rates in the 5–15% range. While the rules are convenient, always use the exact formula when accuracy matters!
Exact Formulas?
For precise calculations, use the exact formula based on logarithms:
- To triple your money:
- To quadruple your money:
These rules for 4x or 3x can be summarized with the following python formula:
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def exact_time_for_multiplier(n, rate_percent): rate_decimal = rate_percent / 100 return math.log(n) / math.log(1 + rate_decimal) # Example: Growing your money 10x n = 10 rate = 8 # 8% annual interest exact_time = exact_time_for_multiplier(n, rate) print(f"Exact time to grow money {n}x at {rate}% interest: {exact_time:.2f} years") |
Generally, these rules are explained a bit into more details in the video, below:
The GitHub repository is here: https://github.com/Vitosh/Python_personal/tree/master/YouTube/024_Python-Rule-of-114
Enjoy it! 🙂