Inflation Calculator

How this is calculated

future cost = amount × (1 + i)ⁿ;  buying power = amount ÷ (1 + i)ⁿ

Worked example: $100,000 at 5% for 20 years → the same basket costs about $265,000, and today’s $100,000 will buy only about $37,700 worth. Plan in real, not nominal, terms.

Why the same money buys less

Inflation is a rise in the general price level, so a fixed sum of money commands fewer goods over time. It is usually measured by a consumer price index, which tracks a representative basket of what households actually buy and reweights it periodically. That basket is the key to reading any inflation figure: your personal inflation rate depends on what you spend money on, and someone whose budget is dominated by rent, transport and electricity can experience a very different rate from the headline.

Core inflation strips out food and energy, not because they do not matter — they matter enormously to households — but because they are volatile enough to obscure the underlying trend that central banks are trying to steer.

The arithmetic of compounding prices

Inflation compounds, which is why modest-sounding rates do so much damage over a working life. At 6% a year, prices double in about twelve years; at 3%, in about twenty-four. The rule of 72 gives that approximation instantly: divide 72 by the rate. Over a forty-year career, 6% inflation means the money you earn at the end must be roughly ten times the money you earned at the start to buy the same things.

Nominal and real returns

This is the single most useful application of an inflation calculator. An investment returning 9% while inflation runs at 6% has not made you 9% better off — it has made you roughly 3% better off, and precisely 1.09 ÷ 1.06 − 1 = 2.83%. A savings account paying 4% during 6% inflation is losing you purchasing power every year despite the balance rising, which is how people can be diligent savers and still end up poorer.

The same correction applies to salaries. A 5% raise in a 6% inflation year is a pay cut in real terms, and the pay cut is invisible on the payslip.

Reading historical figures honestly

Converting a historical amount to today's money is genuinely useful for context and genuinely approximate. Index baskets change composition over decades, quality changes in ways an index struggles to capture — a 1980 car and a 2026 car are not the same product — and entire categories appear and disappear. Treat a converted figure as an order of magnitude, not a precise equivalence, and be especially careful across periods longer than a generation.