Inflation Calculator

How this is worked out

Inflation compounds in exactly the same way as interest, only against you. If prices rise 2.5% a year, then after n years the same goods cost (1 + 0.025)^n times as much, and money you are holding buys 1 ÷ (1 + 0.025)^n of what it does today.

The calculator shows this from both directions, because people reason about it differently:

• What it will buy in today's money answers "if I keep this under the mattress, what have I really got in twenty years?"
• Amount needed then to match it answers "what would my salary have to be in twenty years to feel the same as now?"

The halving time is the one people find most striking. It uses the same mathematics as compound growth in reverse: at 2.5% a year, money loses half its purchasing power in about 28 years. At 5%, it takes only 14.

A worked example

50,000 held for 20 years at 2.5% inflation:

• It will buy what about 30,500 buys today
• You have lost roughly 19,500 of purchasing power, about 39%
• To have the same buying power then, you would need about 81,900

This is the argument against holding long-horizon money in cash. Notice that nobody stole anything and the balance never went down. The number on the statement still says 50,000. It simply does less.

Run the same figures at 5% inflation and the 50,000 buys what 18,800 buys today — a 62% loss over the same twenty years. Small differences in the rate compound into very large differences in outcome.

What this doesn't cover

• Published inflation figures are averages across a basket of goods. Your personal rate depends on what you actually buy — housing, energy and food have often risen faster than the headline number.
• The calculator uses a single fixed rate. Real inflation varies year to year, sometimes sharply.
• It says nothing about what you should do. It only shows the size of the effect on money left uninvested.

Common questions