How to use this calculator
- Enter the Amount today (a price, a budget or a savings balance).
- Choose an Inflation rate: use a long-run average rather than last month's figure.
- Set the number of Years you want to look ahead.
- Read the future cost, the buying power of today's amount and the cumulative price rise. The table lists every year.
How inflation compounds
Inflation is the average rise in prices over time. It compounds like interest: each year's increase applies to the already higher price. Two quantities follow from the same growth factor. The future cost of the same things goes up by that factor, and the buying power of a fixed amount of money goes down by the same factor.
Future cost = A × (1 + i)^n; Buying power = A / (1 + i)^n- A = amount today
- i = annual inflation rate as a decimal (3% = 0.03)
- n = number of years
Because of compounding, the total rise is larger than the yearly rate times the years.
Example: $1,000 at 3% over 10 years
With the default 3% rate, goods that cost $1,000 today cost $1,343.92 in ten years, a cumulative price rise of 34.39%. Flip it around: $1,000 in cash will only buy what $744.09 buys today, a loss of 25.59% of its buying power.
Notice that the rise (34.39%) and the loss of buying power (25.59%) are different numbers. Prices rising by a third means money loses a quarter of its value, not a third.
Example: a monthly budget over 20 years
If a household spends $2,500 a month and inflation averages 4%, the same lifestyle costs $5,477.81 a month after 20 years, a rise of 119.11%. Money set aside at that point that earns nothing would hold only $1,140.97 of today's buying power, a 54.36% loss.
At a gentler 2% over 25 years, a $40,000 annual salary would need to reach $65,624 just to keep the same purchasing power. A raise that falls behind inflation is a pay cut in real terms.
Using the result to plan
Use the future cost when setting long-term targets: tuition, a retirement budget or a savings goal should be stated in future dollars, not today's. The retirement calculator already shows results in today's money for this reason, and the savings goal calculator can be given an inflated target.
Run the numbers at a lower and a higher rate. If the plan only works at the lowest assumption, it is fragile.
Protecting your purchasing power
Cash that earns less than inflation loses ground every year. Compare your savings yield with the inflation rate: if the real return (yield minus inflation) is negative, your balance is shrinking in buying-power terms. Investments that have historically outpaced inflation carry risk, so match the choice to your time horizon. Use the Rule of 72 calculator to see how quickly prices double at a given rate.
Assumptions and limits
The calculator applies one constant rate to all prices. Real inflation varies by year and by category: housing, healthcare, food and education often move differently from the overall average, and your personal rate depends on what you buy. Treat the output as a planning illustration, not a forecast of future prices.
Frequently asked questions
How do I calculate the future cost of something?
Multiply today's price by (1 + inflation rate) raised to the number of years. The calculator does this and lists each year.
What inflation rate should I use?
Use a long-run average for your country, and test a lower and a higher rate. Your central bank's stated target is a common starting point.
Why is the loss of buying power smaller than the price rise?
Buying power is the inverse of the price level. A 34% price rise means each dollar buys 1/1.34 of what it did, about 25.6% less.
Does inflation affect savings and debt differently?
Yes. Inflation erodes cash savings, but it also reduces the real burden of fixed-rate debt, provided your income keeps up.