Finance
Inflation Calculator
Works purchasing power over time, where the index matters.
Result
Uses one constant rate. Real inflation varies year to year and hits trades unevenly. Material and labour costs have moved very differently from general consumer prices in recent years.
Get a Free Business AuditHow the calculation works
An amount adjusted by the change in a price index between two dates, giving the equivalent purchasing power. The result depends on which index is used, since a general consumer index describes an average basket that may not resemble any particular household's spending.
What moves the number
- The index used and the period covered.
- Which basket the index represents.
- Whether the comparison is forward or backward looking.
- Regional variation, where the index is national.
Where this one goes wrong
A general price index averages across a basket, which means a household whose spending is concentrated in categories that rose faster than average has experienced more inflation than the headline figure, and that gap has been substantial in some periods. Note what the index covers. Using the index to project forward also assumes future inflation resembles an assumption you supplied, which makes any forward figure a consequence of that rather than a forecast.
Before you quote
- Note which index and which basket the figure uses.
- Treat forward projections as assumptions, not forecasts.
- Consider whether your own spending resembles the basket.
Where the rules come from
Questions
About this calculator
Does the inflation figure apply to me?
Approximately. A general index averages across a basket, so a household whose spending concentrates in categories that rose faster has experienced more inflation than the headline figure, and that gap has been substantial in some periods.
Which index should be used?
The one whose basket best matches the question, and the figure should state which it used. The published consumer price indices differ in coverage and methodology, and comparing figures derived from different indices is not a comparison.
Can inflation be projected forward?
Only as an assumption. A forward figure is an arithmetic consequence of the rate you supplied rather than a forecast, which is why testing a higher rate is worth doing on anything with a long horizon.
The formula
future equivalent = amount × (1 + rate)^years
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How to use this calculator
- Amount ($). Enter your own figure; the page starts at $100,000.
- Annual inflation rate (%). Enter your own figure; the page starts at 3%.
- Number of years. Enter your own figure; the page starts at 10.
The result updates as you type, so you can try a figure, see what it does to equivalent amount in the future, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Amount | $100,000 |
| Annual inflation rate | 3% |
| Number of years | 10 |
What comes out
| Result | Value |
|---|---|
| Equivalent amount in the future main result | $134,392 |
| What today's amount will be worth | $74,409 |
| Purchasing power lost | $25,591 |
| Percentage of value lost | 25.6% |
At 3% inflation you would need $134,392 in 10 years to match 100,000 today. Held as cash, that money would lose 25.6% of its purchasing power.
How sensitive the answer is
Holding everything else steady and changing only amount, this is what happens to equivalent amount in the future. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Amount ($) | Equivalent amount in the future |
|---|---|
| $50,000 | $67,196 |
| $75,000 | $100,794 |
| $100,000 example above | $134,392 |
| $150,000 | $201,587 |
| $200,000 | $268,783 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Amount ($)
- A money amount, starting at $100,000.
- Annual inflation rate (%)
- A percentage, between 0 and 100, starting at 3%.
- Number of years
- A number, between 0 and 100, starting at 10.
What the results tell you
| Result | What it is |
|---|---|
| Equivalent amount in the future | The headline result. A money figure. |
| What today's amount will be worth | A money figure. |
| Purchasing power lost | A money figure. |
| Percentage of value lost | A percentage. |
Rates and terms move
Loan and interest figures assume the rate and term you enter hold for the whole period. Variable rates, fees rolled into the balance and early-repayment terms all change the real cost.
Keep going
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