What does inflation do to your money?
Inflation is the gradual rise in prices over time. As prices go up, each unit of currency buys a little less, so the same amount of money loses purchasing power year after year. A basket of goods that costs 100 today might cost 134 in ten years at 3% inflation. Your money did not change — what it can buy did.
The calculator above makes this concrete. Enter an amount, an expected inflation rate and a number of years, and you will see two things: how much that amount will cost in the future, and how much your money will actually be worth in today's terms.
Two ways to read inflation
This tool answers two related questions:
- Future cost — how much you will need in the future to buy what a given amount buys today. Prices rise, so this number goes up.
- Future purchasing power — what a fixed amount of today's money will be worth in the future once prices have risen. This number goes down.
Both are the same force seen from opposite ends, and both matter when you plan ahead.
A worked example
At 3% inflation, 10,000 today has the purchasing power of roughly:
| Years | Future cost of today's basket | Purchasing power of 10,000 |
|---|---|---|
| 5 | 11,593 | 8,626 |
| 10 | 13,439 | 7,441 |
| 20 | 18,061 | 5,537 |
After 20 years, the same 10,000 buys little more than half of what it does today — without you spending a cent.
Why inflation compounds
Inflation is not a one-off; it stacks year over year, exactly like compound interest but working against you. That is why the calculator shows a year-by-year breakdown: a few percent a year feels harmless, but compounded over a decade or two it quietly reshapes what your money can do.
What this means for savers
Money sitting in a low-interest account is losing value in real terms. If your savings earn 1% while inflation runs at 3%, you lose about 2% of purchasing power every year. Understanding this is the first step to deciding whether to hold cash, save, or invest to at least keep pace with — or beat — inflation. To see the flip side, where returns compound in your favour, use the compound interest calculator; to fold inflation into a full retirement plan, try the retirement calculator.
How to use this calculator
- Amount — the sum of money you want to analyse.
- Annual inflation rate — the average yearly inflation you expect. Many developed economies have historically averaged around 2–3%.
- Years — the time horizon you care about.
Adjust the inputs and the breakdown updates instantly, so you can compare optimistic and pessimistic inflation scenarios side by side.