Skip to content
MasterMath

Inflation Calculator

At 3% a year for ten years, 1,000 buys what 744 buys today: a 25.6% loss. Meanwhile, what costs 1,000 now will cost 1,344.

Currency and number format for

That money will be worth

—

That money will be worth—
You will have lost—
As a percentage—
What costs that today will cost—
Cumulative inflation—

How this was worked out

    The formula

    purchasing power = amount ÷ (1 + inflation)^years

    Where it comes from

    Inflation works exactly like compound interest, only against you. Each year's rise applies to prices that already rose, so the effect accelerates quietly. The same calculation read the other way tells you what today's basket will cost later.

    How to work it out by hand

    1. Turn the annual inflation rate into a decimal
    2. Raise (1 + inflation) to the number of years
    3. Divide your amount by that factor for purchasing power
    4. Multiply instead to see what today's prices become

    What is worth knowing

    The asymmetry catches people out: 3% inflation over ten years raises prices by 34% but cuts purchasing power by 25.6%, and both are correct. They are the same fact from opposite ends, because a third added on is a quarter taken off. The practical consequence is that a savings account paying less than inflation loses money in real terms no matter how positive the statement looks. At 3% inflation and 1% interest you are down 2% a year — and the rule of 72 says your money halves in purchasing power in about 24 years.

    Frequently asked questions

    Why is the loss percentage smaller than the inflation figure?

    Because they are measured from different starting points. Prices rising 34% is the same event as purchasing power falling 25.6%: adding a third to a price is taking a quarter off the money.

    What inflation rate should I assume?

    Most central banks target around 2%. Long-run averages in developed economies sit near 3%. For countries with a history of high inflation, historical averages are the safer guide.

    Does this apply to my actual spending?

    Roughly. Official inflation tracks an average basket, and your personal rate depends on what you buy. Rent and energy-heavy budgets usually run above the headline figure.

    How do I beat inflation?

    You need a return above it after tax. That rules out most instant-access savings and is the main argument for investing money you will not need for years.