Buying power over time
Buying power by year
The formula
How it works
Inflation slowly raises prices, so a fixed sum of money buys less over time. This calculator shows both sides: what a purchase costing that amount today will cost in future, and how much your money’s buying power shrinks if it just sits there.
FAQ
What is a normal inflation rate?
Many central banks aim for about 2% a year. It varies with the economy, spiking higher in some periods, but even a low steady rate adds up a lot over decades.
How does inflation affect savings?
Money that earns less interest than the inflation rate loses buying power in real terms, even though the number in your account grows. To stay ahead, your return needs to beat inflation.
What is the difference between nominal and real return?
Nominal return is the percentage your money grows by before accounting for inflation, while real return subtracts inflation to show the actual change in buying power. A 5% nominal return with 3% inflation leaves you only about 2% better off in real terms.
Can prices ever fall instead of rise?
Yes — that is called deflation, and it happens when the overall price level drops rather than rises. You can model it here by entering a negative inflation rate, which will show buying power growing instead of shrinking.
What is hyperinflation?
Hyperinflation is extremely rapid, out-of-control inflation, often defined as prices rising more than 50% in a month. It is rare and usually tied to a collapse in confidence in a currency, far beyond the steady low-single-digit rates most economies experience.
Why does my personal cost of living feel different from the official inflation rate?
Official inflation rates track a broad basket of goods and services, but everyone buys a different mix — someone spending heavily on housing or healthcare can experience higher effective inflation than the national average, and vice versa.
How should I use this for retirement planning?
Run your expected future expenses through the future cost side to see what today’s budget will really cost in retirement, and make sure your savings growth rate assumption beats the inflation rate you enter, not just matches it.
About the inflation calculator
This calculator shows what inflation does to money over time. It works out how much more a purchase will cost in the future if prices keep rising at a given rate, and — the flip side — how much buying power a fixed sum loses if it is simply held. Inflation is the steady rise in the general level of prices, and although a few percent a year sounds small, compounding makes it a powerful force over a lifetime.
How to use it
Enter an amount in today’s money, the annual inflation rate you want to assume, and a number of years. The calculator shows the future cost — what something priced at that amount today would cost later — and the future buying power of the amount if you just kept it. For example, at 3% inflation, $1,000 of goods will cost about $1,344 in ten years, while $1,000 kept in cash will buy only about $744 worth of today’s goods.
The formula
Future cost grows like compound interest, , where is today’s amount, is the yearly inflation rate as a decimal and is the number of years. The buying power of money held as cash is the reverse, , because the same notes buy less each year. Both use the same growth factor — once to push prices up, once to shrink what your money can buy.
Where it is used
Inflation calculations underpin nearly every long-term money decision. Retirement planning uses them to make sure a pension will still cover living costs decades from now, and pay negotiations use them to check whether a raise keeps up with the cost of living. Economists and central banks track inflation to set interest rates, and anyone comparing prices or wages across years relies on it to translate old money into today’s terms.