The Rule of 72 is also known as the "Old Bankers" rule because bankers have used it to work out how long any amount of money takes to double at a given interest rate.

In order to appreciate its importance in an investment scenario, you simply divide 72 by the rate of return you expect on your investment. For instance, if you expect to get an average 8 per cent return on your £10,000 investment, your money will double in 72/8 = 9 years; so the £10,000 investment will take 9 years to double. So, the higher the interest rate the shorter the time the initial investment will take to double and this explains why it is vital to shop around for a higher interest rate on any investment.

The Rule of 72 is useful in financial estimates and understanding the nature of compound interest. Below are some examples of how it works in everyday scenarios:-

* Given the low interest rates (2%) around at the moment, your money will take 72/2 or 36 years to double.

* However, to double your money in 10 years, you require an interest rate of 7.2% (72/10).

* For countries with GDP that grows at 3% a year, the economy doubles in 24 years (72/3). Also, if economic growth slips to 2%, the economy doubles in 36 years. If growth increases to 4%, the economy doubles in 18 years.

On the other hand, the rule of 72 works for expenses like inflation. If inflation rates go from 2% to 3%, your money will lose half its value in 24 years. Equally, as you are likely to have credit cards, then the rule of 72 can help determine when the amount you owe will double. For example, if you pay 15% interest on your credit cards, the amount you owe will double in only 4.8 years! This is why credit card debt can spiral out of control when the rule of 72 works against us.