Inflation Calculator
Calculate how inflation affects the purchasing power of your money over time. See what today's money will be worth in the future.
What Is a Inflation Calculator?
An inflation calculator shows how the purchasing power of money changes over time due to rising prices. Inflation is the gradual increase in the general price level of goods and services, which means each unit of currency buys less as time passes. Understanding this impact is critical for long-term financial planning, retirement projections, and evaluating the real return on savings and investments.
Inflation affects every aspect of your financial life. A salary that feels comfortable today may not cover the same expenses in 10 or 20 years. Savings sitting in a low-interest account lose real value every year if the interest rate is below the inflation rate. This calculator helps you quantify these effects so you can make informed decisions about saving, investing, and spending.
Use this tool to adjust financial projections for inflation. If your retirement calculator says you will have 1 million in 30 years, use the inflation calculator to see what that amount is worth in today's purchasing power. You can also use it to compare prices across different time periods, or to understand why your grandparents' grocery bill seems impossibly low by today's standards.
How Do You Use This Inflation Calculator?
Enter an amount of money, the expected annual inflation rate, and the time period in years. Click Calculate to see the future equivalent value and how much purchasing power is lost.
- Enter the amount of money you want to evaluate.
- Input the expected annual inflation rate (or use the historical average for your country).
- Set the time period in years.
- Click Calculate to see the inflation-adjusted values.
- Review the purchasing power loss and the equivalent future amount.
- Try different inflation rates to see optimistic and pessimistic scenarios.
How Does the Inflation Calculator Formula Work?
The formula used: Future Value = Present Value × (1 + inflation rate)^years. Present Value = Future Value / (1 + inflation rate)^years
The inflation calculator uses the compound growth formula to show how prices increase over time, which inversely reduces the purchasing power of a fixed amount of money.
Future Price = Present Price × (1 + i)^nReal Value = Nominal Value / (1 + i)^n
i is the annual inflation rate as a decimal (e.g., 3% = 0.03). n is the number of years. The first formula shows how much you would need in the future to buy what a given amount buys today. The second formula shows the real (inflation-adjusted) value of a future sum in today's purchasing power.
What Are Some Example Calculations?
With $100 today and 3% annual inflation over 20 years: Future equivalent = $180.61 needed to buy the same goods. Your $100 has the purchasing power of $55.37 in today's terms.
Retirement planning: What will $50,000/year be worth in 25 years at 3% inflation?
Future equivalent = $50,000 × (1.03)^25 = $50,000 × 2.0938
You will need $104,689/year in 25 years to maintain the same standard of living as $50,000/year today.
Savings erosion: £10,000 in a savings account earning 1% while inflation is 4%, over 5 years
Real value = £10,000 × (1.01)^5 / (1.04)^5 = £10,510 / £12,167
Your £10,000 grows to £10,510 nominally but is worth only £8,638 in today's purchasing power — a real loss of £1,362.
Historical comparison: What would €1,000 from 2006 be worth in 2026 at 2.5% average inflation?
Future equivalent = €1,000 × (1.025)^20 = €1,000 × 1.6386
€1,000 in 2006 has the same purchasing power as €1,639 in 2026. Conversely, €1,000 today buys what €610 bought in 2006.
When Should You Use a Inflation Calculator?
Use the inflation calculator whenever you are doing long-term financial planning. It is essential for retirement projections, where you need to know the real purchasing power of your future savings. It also helps when evaluating salary offers over time — a 2% annual raise in a 3% inflation environment is actually a pay cut in real terms.
The calculator is valuable for investors who want to understand their real rate of return. If your investments earn 7% and inflation is 3%, your real return is approximately 4%. Use this tool to set realistic expectations for wealth growth and to avoid the common mistake of celebrating nominal gains that are partly eaten by inflation.
What Do These Terms Mean?
What Are the Best Tips to Know?
- Use your country's historical average inflation rate (typically 2-3% for developed nations) for long-term projections.
- Always compare savings account interest rates to the current inflation rate — if the rate is lower, you are losing purchasing power.
- Factor inflation into retirement planning by using real (inflation-adjusted) return rates rather than nominal rates.
- Remember that inflation rates vary by category — healthcare and education costs often rise faster than the general rate.
- Review inflation assumptions annually, as rates can shift significantly due to economic conditions.
What Mistakes Should You Avoid?
- Ignoring inflation entirely when doing long-term financial planning, leading to significant shortfalls in retirement.
- Assuming inflation is always close to the historical average — actual rates can spike during economic disruptions.
- Confusing nominal value with real value, celebrating savings milestones without accounting for reduced purchasing power.
- Using a single country's inflation rate for international comparisons or foreign investments.
Frequently Asked Questions
What is a normal inflation rate?
Most central banks target an inflation rate of around 2% per year. Historically, developed economies have averaged 2-3% annual inflation over long periods. However, inflation can spike to 5-10% or more during economic disruptions.
How does inflation affect my savings?
If your savings earn less interest than the inflation rate, you lose purchasing power every year. For example, savings earning 1% while inflation is 3% means you lose approximately 2% of real value annually.
What is the difference between inflation and deflation?
Inflation is a rise in the general price level (positive rate), making money worth less over time. Deflation is a fall in the general price level (negative rate), making money worth more. Deflation is rare and can signal economic problems.
How should I adjust my investments for inflation?
Subtract the inflation rate from your nominal return to get the real return. Invest in assets that historically outpace inflation, such as equities, real estate, and inflation-linked bonds. Avoid holding too much cash long-term.
Does inflation affect everyone equally?
No. Inflation impacts people differently based on spending patterns. Retirees on fixed incomes are hit harder because their income does not adjust. People with large mortgages may benefit because they repay with money that is worth less than when they borrowed.
What causes inflation?
Key causes include increased money supply, rising demand that exceeds supply, higher production costs (energy, wages), and supply chain disruptions. Central banks manage inflation primarily through interest rate adjustments.
How do I protect my money from inflation?
Invest in assets that historically outpace inflation: diversified stock index funds, real estate, inflation-protected bonds (like TIPS or index-linked gilts), and commodities. Avoid holding large amounts in cash or low-interest savings accounts long-term.
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