Inflation Calculator

Calculate how inflation affects the purchasing power of your money over time. Understand how much you'll need in the future to maintain the same standard of living and see the real impact of inflation on your savings.

Inflation Calculation Formula

Future Value = Present Value × (1 + r)^n | Purchasing Power = Present Value / (1 + r)^n
Variables:
  • Present Value: Current amount of money
  • r: Annual inflation rate (as decimal, e.g., 0.03 for 3%)
  • n: Number of years
Example:
For $10,000 at 3% inflation over 10 years: Future Value = $13,439, Purchasing Power = $7,441

Inflation Calculation Examples

Example 1:Typical inflation scenario
Input:
Present Amount: $10,000
Inflation Rate: 3%
Years: 10
Result:
Future Value: $13,439, Purchasing Power: $7,441
Example 2:Long-term savings impact
Input:
Present Amount: $50,000
Inflation Rate: 2.5%
Years: 20
Result:
Future Value: $81,930, Purchasing Power: $30,515
Example 3:High inflation short-term
Input:
Present Amount: $1,000
Inflation Rate: 5%
Years: 5
Result:
Future Value: $1,276, Purchasing Power: $784
Example 4:Retirement planning
Input:
Present Amount: $25,000
Inflation Rate: 4%
Years: 15
Result:
Future Value: $45,026, Purchasing Power: $13,881
Example 5:Long-term wealth preservation
Input:
Present Amount: $100,000
Inflation Rate: 2%
Years: 30
Result:
Future Value: $181,136, Purchasing Power: $55,207
Example 6:High inflation impact
Input:
Present Amount: $5,000
Inflation Rate: 6%
Years: 10
Result:
Future Value: $8,954, Purchasing Power: $2,792
Example 7:Mid-term planning
Input:
Present Amount: $75,000
Inflation Rate: 3.5%
Years: 25
Result:
Future Value: $178,410, Purchasing Power: $31,523
Example 8:Lifetime wealth impact
Input:
Present Amount: $200,000
Inflation Rate: 2.2%
Years: 40
Result:
Future Value: $481,000, Purchasing Power: $83,160

Frequently Asked Questions

Q1: What is inflation and how does it affect purchasing power?
Inflation is the rate at which prices for goods and services rise over time, reducing the purchasing power of money. If inflation is 3% per year, $100 today will only buy what $97 could buy next year. Over time, this significantly erodes the value of savings.
Q2: How is inflation calculated?
Inflation is calculated using the formula: Future Value = Present Value × (1 + inflation rate)^years. Purchasing Power = Present Value / (1 + inflation rate)^years. This shows how much money you'll need in the future to maintain the same purchasing power.
Q3: What is a typical inflation rate?
Historically, average inflation in developed countries ranges from 2-3% per year. Central banks often target around 2% inflation. However, inflation can vary significantly - it can be near zero during deflation or reach double digits during economic crises.
Q4: How does inflation affect my savings?
Inflation erodes the real value of money over time. If you keep $10,000 in a savings account earning 1% interest while inflation is 3%, you're effectively losing 2% per year in purchasing power. This is why investing is important to beat inflation.
Q5: What investments can beat inflation?
Historically, stocks, real estate, and certain bonds have provided returns above inflation. However, these come with risk. Diversified portfolios and long-term investments typically help preserve and grow purchasing power better than cash savings.
Q6: How should I plan for inflation in retirement?
When planning for retirement, assume 2-3% annual inflation. This means you'll need significantly more money in 20-30 years to maintain your lifestyle. Consider inflation-adjusted investments and plan for increasing expenses over time.
Q7: What is the difference between nominal and real returns?
Nominal returns are the stated returns on investments. Real returns = Nominal returns - Inflation rate. For example, if you earn 7% on an investment but inflation is 3%, your real return is only 4%. Real returns show actual purchasing power growth.
Q8: Can inflation be negative?
Yes, negative inflation is called deflation. During deflation, prices decrease, increasing purchasing power. However, deflation can indicate economic problems and may lead to reduced spending, job losses, and economic stagnation.

Related Calculators

EMI Calculator
Calculate your Equated Monthly Installment (EMI) for loans
Loan Monthly Payment Calculator
Calculate monthly loan payments
Compound Interest Calculator
Calculate compound interest on investments
Percentage Calculator
Calculate percentages