How the Inflation Calculator Works
Enter a current amount, an assumed annual inflation rate, and the number of years to project.
Future Cost shows how much money you'd need in the future to buy what today's amount buys today.
Purchasing Power shows what today's amount will effectively be worth, in today's terms, after inflation erodes it over that period — useful for understanding why a fixed sum feels smaller over time.
Why Understanding Inflation Matters
- Prevents underestimating future goals: a retirement, education, or wedding fund calculated using today's costs alone will almost always fall short, since prices keep rising in the years before you need the money.
- Puts investment returns in perspective: a 7% return sounds attractive on its own, but if inflation is running at 6%, your real (inflation-adjusted) growth is only about 1% — inflation is what turns a nominal return into a meaningful one.
- Explains why cash loses value sitting idle: money kept in a low- or zero-interest account steadily loses purchasing power, even though the number on the balance never goes down.
- Helps you compare offers across time periods: knowing the inflation-adjusted value of a past salary, price, or investment makes it possible to fairly compare it to today's figures.
- Informs how much risk you may need to take: if safe, low-return options don't beat inflation over your time horizon, that's a signal to consider assets with higher long-term growth potential for money you won't need soon.
Formula Used
Both figures use the same compound growth formula, applied in opposite directions:
Future Cost = Amount × (1 + r)^n | Purchasing Power = Amount ÷ (1 + r)^n- rAnnual inflation rate (as a decimal)
- nNumber of years
Example Calculation
How 100,000 today is affected by 6% annual inflation over 10 years.
- Current Amount100,000
- Inflation Rate6% p.a.
- Number of Years10
- Future Cost ≈ 179,085, Purchasing Power ≈ 55,839
Important Assumptions
- This calculator assumes a constant annual inflation rate for the whole period — actual inflation fluctuates year to year and varies by category of spending, with things like healthcare and education often outpacing general prices.
- The inflation rate you enter is an assumption for planning purposes, not a forecast or a guarantee of future inflation.
- This calculator doesn't account for changes in income, investment returns, or lifestyle over the projection period.
Frequently Asked Questions
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