Inflation Calculator
See how inflation changes the purchasing power and future cost of a sum of money.
Written by Rahman · Last reviewed
Quick answer
At 3% a year prices roughly double in 24 years, and money loses about half its buying power over the same span. Inflation runs in both directions: a future cost grows to amount × (1 + i)ᵗ, while today's money shrinks to amount ÷ (1 + i)ᵗ. Any long-horizon plan that leaves it out understates what will actually be needed, which is why a retirement figure that looks generous in today's money often is not.
Results are estimates for general guidance and are not financial, tax or legal advice. Except where a calculator names a currency, figures carry no currency of their own: put in pounds and you get pounds back, put in rupees and you get rupees. Figures depend on the assumptions you enter and on rates that change over time. Check current rates and speak to a qualified adviser before acting on them.
About the Inflation Calculator
Inflation is the gradual rise in prices over time, which steadily reduces what each unit of currency can buy. A sum that covers your expenses today will buy noticeably less in the future if it simply sits idle.
This calculator shows two things: the future cost of the same goods after inflation, and the future purchasing power of a fixed amount of money in today's terms.
Future cost = Amount × (1 + i)^t Purchasing power = Amount / (1 + i)^t
i is the annual inflation rate and t is the number of years.
Why inflation quietly dominates long plans
Inflation is the one assumption in a long-term plan that compounds against you, and it is usually the one people leave out. Its effect on a 30-year horizon is not a rounding error.
- At 2% a year, money loses about 45% of its purchasing power over 30 years.
- At 3%, it loses about 59%.
- At 4%, it loses about 69%.
- A retirement income of 40,000 in today's money needs roughly 97,000 in 30 years at 3% to buy the same things.
This is why a projected pot should always be judged in today's money. A seven-figure number three decades out sounds transformative and may fund a fairly ordinary standard of living.
Headline inflation is not your inflation
Published rates measure a basket of goods weighted for an average household. Your personal rate depends on what you actually spend on, and the components diverge sharply: housing, energy, education and healthcare have persistently outpaced the average in many countries while consumer electronics have fallen.
If you rent in a tight market or have children in private education, your lived inflation rate can run well above the headline figure for years. Using the published number is reasonable for planning, but treat it as a floor rather than a forecast.
A raise below inflation is a pay cut
The same arithmetic applies to income. A salary that rises more slowly than prices buys less each year, even though the number on the payslip goes up.
- A 3% raise in a year of 4% inflation is a real change of 1.03 ÷ 1.04 − 1, about −0.96%.
- On a salary of 60,000 that is a new figure of 61,800 which buys what 59,423 bought a year earlier, about 577 less.
- Five such years in a row leave the salary at 69,556 on paper and worth about 57,170 in the money of the starting year, a real fall of 4.7%.
Subtracting the two rates (3 − 4 = −1) is a close approximation at low rates and drifts as they rise; dividing is exact. To test a raise, enter last year's salary and the inflation rate for one year: the future cost shown is what the new salary has to reach just to stand still.
Frequently Asked Questions
Why does inflation matter for savings?
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If your savings earn less than the inflation rate, their real value falls over time even though the number stays the same. Beating inflation is essential to preserve wealth.
What inflation rate should I use?
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A common long-term assumption is 2–6% per year, but it varies widely by country and period. Check your local consumer price index for a realistic figure.
What is purchasing power?
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Purchasing power is how much a fixed amount of money can actually buy. As prices rise, the same amount buys fewer goods and services.
How do I protect against inflation?
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Holding assets that historically grow at or above inflation (rather than idle cash) helps preserve and build real value over the long term.