How to use this inflation calculator
- Amount today: a price, a budget, or an amount of savings in today's dollars.
- Expected inflation rate: the yearly rate you want to assume. This is your own choice; the calculator does not use historical data.
- Years from now: how far ahead to look.
You'll see two results. Future cost is what the same spending will cost after that many years. Purchasing power is what your amount will buy then, expressed in today's dollars. The chart shows purchasing power falling year by year, and the table lists both numbers for every year.
What inflation means for your money
Inflation is the general rise in prices over time. When prices rise, each dollar buys a little less than before. Money kept as cash keeps the same number on it but quietly loses value. For long-term plans, such as retirement, education or a home, that matters as much as how much you save.
How the calculation works
Inflation compounds just like interest: each year's price rise applies to prices that have already risen. That's why the effect over decades is larger than simply multiplying the rate by the number of years.
Worked example
In plain terms: something that costs $1,000 today would cost about $1,344 in ten years, and $1,000 kept in cash would then buy only what $744 buys today.
Small rate differences add up
Over long periods, the rate you assume makes a big difference. Here's what $100 of today's spending costs after 10 years at different rates:
| Inflation rate | Cost in 10 years |
|---|---|
| 2% | $121.90 |
| 3% | $134.39 |
| 4% | $148.02 |
Over 20 years the gap widens further: at 3%, $50,000 of today's spending would cost about $90,306, and $50,000 in cash would buy only what about $27,684 buys today.
Using inflation in your plans
- Retirement and long-term goals. Estimate future costs before setting a savings target; otherwise the target will fall short.
- Salary negotiations. A raise smaller than inflation is a pay cut in real terms.
- Savings accounts. Compare your interest rate to inflation. If inflation is higher, your money is losing purchasing power even while the balance grows.
- Budgets for future purchases. Use future cost to set realistic budgets for big purchases years ahead.
Nominal vs real returns
The interest rate or return you see quoted is the nominal rate. What matters for your buying power is the real return: what's left after inflation.
The balance grows by more than $6,000, but its buying power grows by about $2,100. When comparing savings options for long-term goals, look at the real return. An account paying less than inflation is losing purchasing power even though its balance keeps rising. Our compound interest calculator shows the nominal growth; run the result through this calculator to see it in today's money.
What this calculator doesn't include
The calculator uses one constant rate for every year. Real inflation changes from year to year and differs between categories: housing, food, energy, education and healthcare rarely rise at the same pace. Your personal inflation rate depends on what you buy. For actual past price changes, use official CPI figures from your country's statistics agency. Treat the result as a planning estimate, and test a few rates to see the range.