Inflation Calculator

Prices rise over time, so the same money buys less. Enter an amount, an average yearly inflation rate and a number of years, and this calculator shows what something that costs that amount today would cost then, and how much buying power the money would lose. It uses a steady rate that you choose rather than historical data.

How to use it

1. Enter an amount in today's money.
2. Enter the average yearly inflation rate you expect.
3. Enter the number of years.
4. Read the future price and the loss of buying power.

When it helps

• Seeing why money sitting in cash slowly shrinks.
• Estimating the future cost of a big purchase.
• Planning retirement spending.
• Comparing a savings rate with inflation.

Good to know

• Use a rate that reflects your own country rather than a global figure.
• If your savings earn less than inflation, you're losing buying power even as the balance grows.
• Real inflation moves from year to year, so test a few different rates.

The calculation

Future price equals today's price multiplied by one plus the inflation rate, raised to the number of years. At 4 percent over 10 years, prices rise by a factor of 1.48, so 1,000 becomes 1,480. Buying power is the reverse: 1,000 today buys what 676 buys now.

That's how a steady rate quietly eats away at savings kept in cash.

Worked example: retirement planning

If you need 2,000 a month today and plan to retire in 25 years, at 3 percent inflation you'll need about 4,188 a month to maintain the same lifestyle. At 6 percent, it's 8,584. The difference shows why choosing a realistic rate matters.

Try several rates to see a range, and revisit the plan every few years.

Inflation and your savings

If your savings earn 2 percent and inflation is 5 percent, your money loses about 3 percent of its buying power a year. Real returns equal the nominal return minus inflation, roughly. Cash is useful for emergencies but loses value over the long term.

Options for beating inflation include shares, property, inflation-linked bonds and paying down high-interest debt, each with its own risks.

How inflation is measured

Governments track a consumer price index, which prices a basket of goods and services each month. Your own inflation may differ, depending on what you buy: rent, food and fuel may rise faster than the average.

Rates differ by country and year, from near zero to extreme rises. Use an average that reflects where you live.

A short history of high inflation

Inflation has ranged widely. Some countries have seen prices rise more than 50 percent a month, as in Germany in 1923 or Zimbabwe in 2008, while others have had decades of 2 percent. Even moderate inflation compounds: 7 percent a year halves the buying power of money in about ten years.

That's why savers look for returns above inflation, and why debts lose real value when prices rise.

Questions