The rule of 72 (and why it understates the point)
Divide 72 by your return to estimate doubling time: at 7%, money doubles roughly every 10 years. What people miss is what doubling does over multiple periods: $10,000 becomes $20k, $40k, $80k — the third decade adds $40,000 while the first added $10,000. That's why the boring advice ("start now, even small") is mathematically the strongest advice in finance.
What return should you assume?
| Where the money is | Reasonable long-run assumption |
|---|---|
| High-interest savings account | 4–5% (taxed at your marginal rate) |
| Balanced super fund | 6–7% after fees and taxes |
| Australian/global index funds | 7–9% before tax, long horizons only |
| Mortgage offset (effectively) | Your mortgage rate, tax-free and risk-free |
Be honest about inflation: 7% nominal is roughly 4–4.5% real. If you want the answer in today's dollars, put the real return in the rate box instead.
Where compounding is sabotaged
Fees: a 1% annual fee on a 7% return doesn't cost 1/7th of your outcome — over 30 years it eats close to a quarter of the final balance, because the fee compounds too. Tax drag: interest income is taxed yearly at your marginal rate, which is why savings accounts fall behind super (15% tax) and offset accounts (0%) for long-term money. Interruptions: cashing out and restarting resets the exponential clock — the model above assumes you leave it alone, which is the hard part.