See how inflation changes prices and buying power over time. Enter an amount, an annual inflation rate, and a number of years.
Usage Tip
Compare any investment return to the inflation rate — a 5% return at 3% inflation is only about 2% real growth.
Future buying power = amount ÷ (1 + inflation)^years
This uses a constant annual rate; real inflation varies year to year.
Investments need to beat inflation just to preserve buying power; the gap is the real return.
Fixed incomes and cash lose value to inflation unless they grow at least as fast.
Inflation is the general rise in prices over time, which reduces what a given amount of money can buy. If prices rise at a steady annual rate, an amount grows by that rate each year, so something costing 100 today costs about 134 after ten years at 3 percent inflation.
The same calculation shows buying power in reverse. At 3 percent inflation, 100 today would buy only about 74 percent as much in ten years. Real inflation varies from year to year, so a constant rate is an estimate. The effect compounds, which is why even modest inflation matters over long periods, especially for savings that earn less than the inflation rate.