Inflation Calculator
See how inflation changes the future cost of money and erodes purchasing power.
Inputs
Future Cost of Today's Basket
$1,806.11
Future Value of Today's Money
$553.68
Purchasing Power Lost
$446.32
Step by step
Calculate the cumulative inflation factor: (1 + r)ⁿ
(1 + 0.03)^20
= 1.8061
Future cost — what today's basket will cost then
$1,000 × 1.8061
= $1,806.11
Purchasing power — what today's money buys then
$1,000 ÷ 1.8061
= $553.68
Purchasing power lost
$1,000 − $553.68
= $446.32
At 3.0% annual inflation, 44.6% of today's purchasing power is eroded over 20 years.
How it works
Inflation raises prices over time. Something costing your amount today will cost 'future cost' later, and the same money will only buy what 'future value' represents in today's terms.
Formulas
Future cost
Future Cost = Amount × (1 + r)ⁿ
- C_n
- Cost after n years
- A
- Amount (price) today
- r
- Annual inflation rate (decimal)
- n
- Number of years
Purchasing power
Purchasing Power = Amount ÷ (1 + r)ⁿ
- P_n
- Purchasing power of today's amount in n years
Guides that use this calculator
Estimates only; actual inflation varies year to year and is not predictable.
Frequently Asked Questions
What inflation rate should I use?
Long-run inflation in developed economies has averaged around 2–3% per year, though it varies significantly by period and country.
Why does my money lose value?
As prices rise, each dollar buys fewer goods. Holding cash that doesn't earn at least the inflation rate steadily reduces your real wealth.