The Rule of 70:

The Rule of 70 for inflation is a fast monetary approximation to find how many years it will take the purchasing power of money to be reduced by half as a result of an ongoing yearly inflation rate. To apply it, you divide the number 70 by the ongoing yearly inflation rate. For instance, if the inflation rate is 5%, the Rule of 70 indicates that the purchasing power of your money will decrease by half in around 14 years (70 ÷ 5 = 14). How to Apply the Rule of 70 for Inflation
Calculate the Inflation Rate: Determine the inflation rate for a year, in percentage form.
Use the Formula: Divide the number 70 by the inflation rate.
Interpret the Result: The result is approximately how many years it will take for the value of your money (its purchasing power) to fall by half.
Why It’s Important
Understand Value Erosion:
The rule emphasizes how rapidly inflation reduces the purchasing power of your money.
Inform Investment Decisions:
It offers a valuable insight into retirement and other long-term financial planning by illustrating the necessity of investing funds in order to beat inflation.
Estimate Future Costs:
Alternatively, you can also use it to determine how long it would take the price of a good or service to double. For instance, using a 3.5% per annum inflation rate, a basket of goods worth $100 today would be worth about $200 in about 20 years (70 ÷ 3.5 = 20).