Inflation Calculator

Inflation can be read in two directions, and they are not 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 — a loss of 68.8%, not 220%.

The asymmetry catches people constantly. A price that triples has risen 220%, but the money that used to buy it has not fallen 220%; it has fallen just over two thirds. Percentage increases and decreases are computed on different bases, and inflation is where that difference has the biggest practical consequences. Anyone budgeting a long-horizon goal in nominal terms is quietly making this error.

The uses that actually justify the arithmetic

Sizing a future expense. School fees, a wedding, a replacement car in eight years. Inflate the current price rather than saving toward today's figure.

Testing a fixed income. A pension or annuity that does not escalate is worth less every year. Run the annual amount forward to see the real position at the end of the term rather than the start.

Judging a nominal return. A deposit paying 7% while prices rise 6% is earning about 1% in real terms before tax. The headline number on the statement flatters the outcome.

Reading an old figure. Run a historical salary or price forward to compare it with today on a 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 conceals that entirely. Two decades at an average 6% could mean a steady 6% or long stretches at 2% punctuated by a spike; the endpoints match, the experience does not.

More importantly, the headline consumer index is not your index. Households weight their spending differently, and the categories that dominate a given budget — rent, school fees, medical care, childcare — have often risen faster than the general basket. If those dominate your outgoings, a headline rate understates your personal inflation and this calculation will be optimistic.

Nothing here is a forecast. It is arithmetic applied to a rate you chose, and the quality of the answer is entirely the quality of 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.