Inflation Calculator

You can read inflation in two directions, and they aren't mirror images of each other. This calculator gives you both from a single rate: what a purchase will cost later, and what today's money will be worth by then.

Both directions at once

Enter 50,000 with a 6% rate over 20 years and the result panel shows:

• Future cost of the same basket: 1,60,357
• What 50,000 will then buy, in today's terms: 15,590
• Loss in purchasing power: 34,410

Future cost   = amount × (1 + r)^n
Today's worth = amount ÷ (1 + r)^n

Why 220% up is 69% down

Twenty years at 6% multiplies prices by 3.207. Going the other way, the same factor cuts purchasing power to 31.2% of what it was, which is a loss of 68.8%.

People get caught by this all the time. A price that triples has risen 220%, but the money that used to buy it has fallen by just over two thirds. Percentage increases and decreases are worked out on different bases, and inflation is where that difference matters most in practice. If you're budgeting for a long-horizon goal in nominal terms, you're probably making this mistake without noticing.

When the arithmetic is actually useful

Sizing a future expense. School fees, a wedding, a replacement car in eight years. Inflate the current price and save toward that, not toward today's figure.

Testing a fixed income. A pension or annuity that doesn't escalate is worth less every year. Run the annual amount forward to see where you'll really stand at the end of the term.

Judging a nominal return. A deposit paying 7% while prices rise 6% is earning about 1% in real terms before tax, which is a lot less impressive than the number on the statement.

Reading an old figure. Run a historical salary or price forward so you can compare it with today on a like-for-like basis.

One rate is a strong assumption

The projection holds the rate constant for the whole period. Real inflation moves, sometimes sharply and sometimes for years at a stretch, and a single average hides all of that. Two decades at an average 6% could mean a steady 6%, or long stretches at 2% broken up by a spike. You'd end up in the same place but live through very different years.

The bigger issue is that the headline consumer index isn't your index. Households spend in different proportions, and the categories that dominate many budgets (rent, school fees, medical care, childcare) have often risen faster than the general basket. If those make up most of your outgoings, a headline rate understates your personal inflation and this calculation will be optimistic.

Nothing here is a forecast. It's arithmetic applied to a rate you chose, so the answer is only as good as that choice. Run it at two or three rates and treat the range as the result.

Pair this with

To size a retirement target with inflation built into the drawdown, use the retirement calculator. To compare a nominal investment return against the erosion shown here, use the compound interest calculator. For growth rates on business revenue, the revenue growth calculator works the same compounding maths in the other direction.