Inflation Calculator
Understand the true cost of inflation with our powerful calculator. See how the value of money erodes over time, calculate the future purchasing power of your savings, and determine how much money you'll need in the future to have the same buying power as today. Essential for long-term financial planning.
Inputs
Enter the required values to calculate.
Result
The calculated result will appear here.
More Information
Understanding the Inflation Calculator
Inflation is a key economic concept that describes the rate at which the general level of prices for goods and services is rising, and subsequently, the purchasing power of currency is falling. This calculator helps you quantify that effect and understand its impact on your financial planning.
The Formula for Future Value
The future value (FV) which represents today's buying power in the future is calculated as:
FV = PV / (1 + i)^n
- PV = Present Value (the initial amount).
- i = The average annual inflation rate per period.
- n = The number of periods (years).
Key Outputs Explained
- Future Buying Power: This shows you what a certain amount of money today (e.g., $1,000) will be worth in the future, in terms of today's dollars. It demonstrates the erosion of value. For example, after 20 years at 3% inflation, $1,000 will only buy what about $553 buys today.
- Future Amount Needed: This shows you how much money you would need in the future to have the same purchasing power as a certain amount of money today. This is crucial for planning long-term goals like retirement. Our Retirement Calculator uses this principle to show your nest egg in "today's dollars".
By understanding how inflation affects your money, you can make more informed decisions about saving and investing, aiming for a rate of return that outpaces the rate of inflation to grow your real wealth.