How inflation compounds
You enter an amount of money today, an average annual inflation rate and a number of years. The calculator compounds the rate over those years with a single growth factor, factor = (1 + rate / 100)years, and reports three results:
- Cost in N years = amount × factor. It is what a basket of goods that costs the amount today will cost then.
- Future buying power = amount ÷ factor. This is what the same nominal amount, held in cash, will be worth in today's terms.
- Value lost to inflation = amount − buying power.
The years field takes 0 to 100. The rate can be negative down to −50 to model deflation, in which case the labels switch to deflation wording and the cost falls while buying power rises. The rate is whatever you type; nothing is pulled from CPI statistics, and a single rate is applied to every year. A summary sentence beneath the results restates the numbers.
Worked example
At 4% a year over 10 years the factor is 1.0410 = 1.4802. Something costing 10,000 today will cost about 14,802, while 10,000 in cash will only buy what 6,756 buys today, a loss of 3,244. The two figures are not mirror images: prices rise 48%, but cash loses about 32.4% of its value.
| 10,000 over 10 years | Cost then | Buying power of 10,000 |
|---|---|---|
| 2% inflation | 12,190 | 8,203 |
| 3% inflation | 13,439 | 7,441 |
| 4% inflation | 14,802 | 6,756 |
| 6% inflation | 17,908 | 5,584 |
Doubling the time matters more than people expect: at 3%, 20 years takes the cost of a 10,000 basket to 18,061, and the buying power of 10,000 in cash falls to 5,537. A rough check is the rule of 72: at 4%, prices double in about 72 ÷ 4 = 18 years.
What this does not do
- No historical lookups. It cannot tell you what 1990 dollars are worth now, because it does not know the actual CPI values for any year. For a past-to-present conversion you would need published index data for your country.
- Prices are not uniform. The headline rate is an average. Housing, education and healthcare often rise faster than the average, and electronics often rise slower, so your own inflation can be different.
- Real return. To compare a savings yield with inflation, divide rather than subtract: 7% nominal with 3% inflation is 1.07 ÷ 1.03 − 1 = 3.88% real, not 4%.
- Deflation is allowed, within limits. Rates down to −50% can be entered; anything lower shows a message.
Pair it with the compound interest calculator to see whether growth outpaces inflation, or the retirement calculator, which shows inflation-adjusted totals for a long horizon. The ROI calculator gives the nominal CAGR to compare against.