Inflation calculator

Formula

How it works

At inflation rate i, prices grow by the factor (1 + i) every year, and money loses buying power by the same factor.

Worked example

The same calculation with the default values:

• Amount today 100
• Annual inflation rate 3 %
• Years 10

1. factor = (1 + 3 ÷ 100)^10 = 1.343916
2. future price = 100 × 1.343916 = 134.391638
3. purchasing power = 100 ÷ 1.343916 = 74.409391

Result: Future price of what costs this today: 134.39 USD · What this amount will be worth in today's money: 74.41 USD · Purchasing power lost: 25.59 USD

Common mistakes

• Using a single long-run average inflation rate to project many decades ahead - actual inflation varies significantly year to year and decade to decade, so long projections carry much more uncertainty than short ones.
• Confusing "future cost" (what today's amount will cost later) with "today's value of a future amount" (what a future amount is worth in today's purchasing power) - they use the same rate in opposite directions.
• Applying a national average inflation rate to a specific category of spending (e.g. tuition, healthcare) that may inflate faster or slower than the average.