How to use the Inflation Calculator
- Choose Future cost to project prices forward, or Past to today to bring an old amount into today’s money.
- Enter the amount.
- Enter the average yearly inflation rate and the number of years.
- Read the equivalent amount, the purchasing power and the cumulative inflation, then check the yearly table.
Features
- Future cost of today’s prices
- Today’s value of an amount from the past
- Purchasing power lost to inflation
- Cumulative inflation over the period
- Yearly chart and table with CSV export
- Uses your own rate, so it works for any country
What inflation does to money
Inflation is the general rise in prices over time. When prices rise, each unit of money buys less, so the same amount of cash loses purchasing power every year. Even moderate inflation has a large effect over long periods, which is why it matters for savings, salaries and retirement plans.
The formulas
Inflation compounds like interest. With an average yearly rate i over n years:
- Future cost = Amount × (1 + i)n
- Purchasing power = Amount ÷ (1 + i)n
- Cumulative inflation = (1 + i)n − 1
Example: at 3% a year for 10 years, something that costs 1,000 today will cost about 1,343.92. Put the other way, 1,000 kept in cash will then buy only what 744.09 buys today, a loss of about 25.6% of its purchasing power. Prices rise 34.4% in total, not 30%, because each year’s increase builds on the last.
The Past to today mode uses the same math looking back in time: 1,000 from ten years ago, with 3% average inflation since, buys about as much as 1,343.92 does today.
How quickly prices climb
| Average inflation | Cost of 1,000 after 20 years | Value of 1,000 after 20 years |
|---|---|---|
| 2% | 1,485.95 | 672.97 |
| 3% | 1,806.11 | 553.68 |
| 5% | 2,653.30 | 376.89 |
The rule of 72 gives a quick estimate of how long prices take to double: divide 72 by the inflation rate. At 3% prices double in about 24 years; at 6% in about 12.
Choosing a rate
This calculator does not include historical price data, so you supply the rate. Good sources are your national statistics office, which publishes the consumer price index (CPI), and your central bank. Many central banks, including the US Federal Reserve, the European Central Bank and the Bank of England, aim for inflation of about 2% a year over the medium term, but actual inflation can stay above or below that for years. For long-range planning, test a few rates, such as 2%, 3% and 4%, rather than relying on one.
Your personal inflation can also differ from the official figure. Someone who spends a lot on rent, school fees or healthcare may see faster price rises than the average basket suggests.
Using the results
- Pay reviews. A 3% raise in a year with 3% inflation leaves your real pay unchanged. Compare offers with the Salary Calculator.
- Savings. Money earning less than inflation is shrinking in real terms. See what an interest rate does with the Compound Interest Calculator.
- Retirement. The income you need decades from now will be far higher in money terms; the Retirement Calculator adjusts for this.
Results are estimates for information only and are not financial advice; real inflation varies from year to year.
Frequently asked questions
How is the future cost with inflation calculated?
Multiply today’s price by (1 + rate)^years. At 4% for 5 years, 500 becomes 500 × 1.04^5, about 608.33.
What is purchasing power?
Purchasing power is how much a sum of money can buy. With inflation it falls each year; the calculator shows it in today’s money by dividing the amount by (1 + rate)^years.
Does this calculator use official CPI data?
No. You enter your own average inflation rate, so it works for any country and any period. Use your national statistics office for official figures.
What inflation rate should I use for planning?
Test a few, for example 2%, 3% and 4%. Many central banks target about 2%, but actual inflation is often higher or lower for long stretches.
Can I enter deflation?
Yes. Enter a negative rate, down to −50%, to see the effect of falling prices.