Inflation Calculator
See how inflation affects the purchasing power of your money over time.
Inflation Calculator
Calculate the future value of money instantly.
Future Equivalent Value
$0What Inflation Does to Money
Inflation is the rate at which prices rise, which is the same thing as the rate at which money loses purchasing power. The number in your account stays still; what it buys quietly shrinks.
This matters most over long horizons. A 3% annual rate barely registers year to year — but sustained across twenty-five years it halves what a given sum can buy. Any plan measured in decades, from retirement to a child's education, has to account for it or the target will be badly wrong.
The Formula
To find what a future amount needs to be to match today's purchasing power:
FV = PV × (1 + i)n
FV = Future Value · PV = Present Value · i = Inflation Rate · n = Years
To work backwards and find what a future sum is worth in today's money:
PV = FV ÷ (1 + i)n
The same relationship, reversed
It's the compound interest formula with the sign flipped — inflation compounds against you exactly as returns compound for you.
What $50,000 Becomes
The cost of maintaining a $50,000 lifestyle, at three different inflation rates:
| Years ahead | At 2% | At 3% | At 5% |
|---|---|---|---|
| 5 | $55,204 | $57,964 | $63,814 |
| 10 | $60,950 | $67,196 | $81,445 |
| 20 | $74,297 | $90,306 | $132,665 |
| 30 | $90,568 | $121,363 | $216,097 |
The gap between 2% and 5% looks minor in year five and becomes $125,000 by year thirty. Small differences in the rate produce enormous differences in the outcome, which is why central banks defend their targets so aggressively.
Nominal Returns and Real Returns
Every return figure you see quoted is nominal — it ignores inflation entirely. The real return is what actually matters, because it measures growth in purchasing power rather than in units of currency.
Real Return ≈ Nominal Return − Inflation Rate
A quick approximation, accurate enough for planning at ordinary rates
| Held in | Nominal return | At 3% inflation | Real outcome |
|---|---|---|---|
| Current account | 0% | −3% | Losing value |
| Savings account | 4% | +1% | Barely ahead |
| Bonds | 5% | +2% | Modest growth |
| Equity portfolio | 8% | +5% | Meaningful growth |
Cash sitting in a non-interest account isn't holding steady — it's shrinking at the inflation rate every year, silently and without a statement line to show it.
How Inflation Is Measured
Official figures come from tracking the price of a representative basket of goods and services over time. The composition is reviewed periodically as spending habits change.
Headline
The full basket, including food and energy. What most people mean by "inflation" and what appears in the news.
Core
Strips out food and energy, which swing sharply for reasons unrelated to underlying trends. Central banks watch this closely.
Personal
Your own rate, which depends on what you actually buy. Renters, drivers, and parents each experience a different figure.
If a large share of your spending goes to categories rising faster than average, your personal inflation rate exceeds the published one — and planning to the official number will leave you short.
What Causes Prices to Rise
- Demand outpacing supply — more money chasing the same volume of goods pushes prices up.
- Rising input costs — when energy, materials, or wages get more expensive, producers pass it along.
- Money supply expansion — more currency in circulation relative to output reduces the value of each unit.
- Supply disruption — shortages from conflict, weather, or logistics failures raise prices regardless of demand.
- Expectations — when businesses and workers expect inflation, they raise prices and wages accordingly, which makes it happen.
Protecting Against It
- Hold only what you need in cash. Emergency funds belong in accessible accounts; anything beyond that is losing ground every year.
- Own assets that grow. Equities, property, and index funds have historically outpaced inflation over long periods, though not reliably in any single year.
- Consider index-linked instruments. Some government bonds adjust their principal with inflation, transferring the risk away from you.
- Plan in real terms. When setting long-range targets, either inflate the target or use a real return. Mixing the two produces plans that quietly fail.
- Negotiate pay against inflation. A 2% raise in a 4% inflation year is a pay cut in everything but name.
- Recognise fixed-rate debt as a hedge. Inflation erodes the real value of what you owe, so a long fixed-rate loan becomes cheaper in real terms over time.
Frequently Asked Questions
Around 2% to 3% is a reasonable long-term assumption for developed economies, since most central banks target that range. For historical comparisons use the actual published figures. For long-range planning, test a higher rate too — plans built on optimistic assumptions tend to fail quietly.
Most economists think a low, stable rate is healthier than zero. It encourages spending and investment rather than hoarding, gives central banks room to cut rates during downturns, and allows wages to adjust without nominal pay cuts. Deflation, where prices fall, tends to be far more damaging.
Because the official figure averages a basket that may not resemble your spending. If rent, childcare, or fuel dominate your budget and those categories are rising faster than average, your personal rate is genuinely higher than the headline number.
On fixed-rate debt, yes. The amount owed stays fixed in nominal terms while its real value erodes, so you repay with money worth less than what you borrowed. Variable-rate debt offers no such protection, since rates typically rise in response to inflation.
Inflation measures the rate of change in prices; cost of living measures the level. One city can be far more expensive than another while both experience identical inflation rates. Moving somewhere cheaper reduces your cost of living but does nothing about inflation itself.
Exact for the rate you enter, but real inflation varies year to year and can't be forecast reliably. Treat the output as a planning estimate. Historical calculations using published figures are considerably more dependable than forward projections.