Inflation Calculator

How to Use This Calculator

1. Enter an amount — any dollar value: a grocery bill, monthly rent, annual salary, or savings balance.
2. Set the inflation rate — use the US average of 3%, or pick a preset to model different scenarios (low, average, high, crisis).
3. Choose a time period — how many years into the future you want to project.
4. Read the results — see both sides: how much more things will cost (future cost) and how much less your money will buy (purchasing power).

How Inflation Works

Inflation means the general price level of goods and services rises over time. A dollar today buys less than a dollar ten years ago. This happens because the money supply grows faster than the economy produces goods, among other factors like supply chain disruptions and energy costs.

The effect compounds, just like interest. At 3% annual inflation, prices don't just go up by 3% each year on the original amount — they go up by 3% on the already-inflated amount. After 10 years, prices are 34% higher. After 20 years, 81% higher. After 30 years, 143% higher. A $5 coffee becomes $12.14 in 30 years.

This is why keeping money in cash is risky over the long term. A savings account earning 0.5% while inflation runs at 3% means you're losing 2.5% of purchasing power every year. Over 20 years, you'd lose nearly 40% of your money's real value despite the balance appearing to grow.

To maintain and grow your purchasing power, your investments need to earn a positive real return — a return above the inflation rate. Historically, stocks have provided about 7% real return (10% nominal minus 3% inflation), making them one of the best long-term inflation hedges.

Frequently Asked Questions

What is inflation?

Inflation is the rate at which the general price level of goods and services rises over time. When inflation is 3%, something that costs $100 today will cost $103 next year. Over long periods, even modest inflation dramatically reduces what your money can buy — $100 today is worth only $55 after 20 years of 3% inflation.

What is the average inflation rate in the US?

The long-term average US inflation rate is about 3% per year, measured by the Consumer Price Index (CPI). However, inflation varies significantly by period: it was under 2% from 2010-2020, spiked to 9.1% in June 2022, and has since moderated to around 2.5-3.5%. The Federal Reserve targets 2% annual inflation.

How does inflation affect my savings?

If your savings earn less than the inflation rate, you're losing purchasing power. Money in a checking account earning 0.01% while inflation is 3% effectively loses about 3% of its value each year. To beat inflation, your investments need to earn a real return — the nominal return minus the inflation rate. This is why investing is important for long-term savings.

What is purchasing power?

Purchasing power is the amount of goods and services you can buy with a unit of currency. As prices rise due to inflation, each dollar buys less — your purchasing power decreases. If inflation averages 3% per year, $1,000 today has the purchasing power of only $744 in 10 years and $554 in 20 years.

How should I protect against inflation?

Common inflation hedges include: investing in stocks (historically ~10% returns, well above inflation), real estate (property values and rents tend to rise with inflation), Treasury Inflation-Protected Securities (TIPS, which adjust with CPI), I Bonds (currently offer inflation-matching returns), and commodities. The worst place to hold money during inflation is cash or low-yield savings accounts.

What is the difference between nominal and real values?

Nominal values are the raw dollar amounts without adjusting for inflation. Real values are adjusted for inflation and represent actual purchasing power. If your salary goes from $50,000 to $53,000 (6% raise) while inflation is 4%, your nominal increase is 6% but your real increase is only about 2%. Always think in real terms for long-term planning.

Related Calculators